Marine industries
global market analysis
March 2005
Douglas-Westwood Limited
Marine Foresight Series
No.1
“to undertake, to co-ordinate, to promote and to assist in marine research and
development and to provide such services related to marine research and
development that, in the opinion of the institute, will promote economic
development and create employment and protect the marine environment”
Marine Institute Act 1991.
Marine Research and Innovation Strategy
This report is one of a series prepared at the request of the Marine Institute as a contribution to the development
of a comprehensive National Marine Research and Innovative Strategy (2006-2012). This strategy being prepared
through the course of 2005 will identify the key actions needed to provide sustainable growth and development
opportunites that will contribute to socio-economic progress and the protection of the marine environment. This
report is designed to identify climate-induced impacts, and necessary related actions, that Foresight/Stateholder
groups will have to take into account in preparing future R&D plans and programmes.
ISSN: 1649-590X
Further copies of this publication may be obtained from:
Marine Institute,
Galway Technology Park,
Parkmore,
Galway,
Ireland.
Alternatively you can download a PDF version from www.marine.ie
Contents
1
Douglas-Westwood – Company Background
7
2
Introduction & Objectives
9
3
Summary & Conclusions
11
4
Methodology & Definitions
31
5
Long-Term Factors
41
6
Shipping & Transport
51
7
Marine Commerce
57
8
Ports
61
9
Cruise Industry
65
10
Marine Tourism
69
11
Ocean Survey
73
12
Submarine Telecoms
79
13
Fishing
81
14
Marine Aquaculture
85
15
Seaweed
89
16
Seafood Processing
91
17
Offshore Oil & Gas
18
Marine Renewable Energy
19
Minerals & Aggregates
105
20
Shipbuilding
107
21
Marine Equipment
111
22
Marine IT
113
23
Marine Biotechnology
117
24
Education & Training
121
25
Research & Development
123
95
101
The information contained in this document is believed to be accurate, but no representation or warranty, express or implied, is made by Douglas-Westwood Limited as to the
completeness, accuracy or fairness of any information contained in this document, and we do not accept any responsibility in relation to such information whether fact, opinion or
conclusion that the addressee may draw.
Douglas-Westwood Limited, St Andrew’s House, Station Road East, Canterbury, Kent, CT1 2WD, UK.
Telephone: +44 1227 780 999 Facsimile: +44 1227 780 880 e-mail: admin@dw-1.com www.dw-1.com
2
MARINE INDUSTRIES GLOBAL MARKET ANALYSIS
MARINE INDUSTRIES GLOBAL MARKET ANALYSIS
Figures
Figure 3.1:
World Marine Industry Totals 2005–2009 (€ billion)
Figure 3.2:
World Marine Industry Sector Totals 2005–2009 (€ billion)
13
Figure 4.1:
Shipbuilding Expressed in € and $
38
Figure 6.1:
Tonne.miles and Charter Rates
51
Figure 6.2:
Shipping – World Market
51
Figure 6.3:
Shipping – Regional Segmentation 2005–2009
52
Figure 6.4:
Shipping Rates 2001–4
52
Figure 6.5:
Danish Shipowners Earnings 2003
53
Figure 7.1:
Marine Commerce – World Market
57
Figure 7.2:
Marine Commerce – Regional Segmentation 2005–2009
57
Figure 7.3:
Marine Commerce Cluster (London)
59
Figure 8.1:
Ports – World Market
61
Figure 8.2:
Ports – Regional Segmentation 2005–2009
61
Figure 8.3:
Chinese Port Container Throughput
63
Figure 9.1:
Cruise – World Market
65
Figure 9.2:
Cruise – Regional Segmentation 2005–2009
66
Figure 9.3:
European Cruise Destinations (million passengers)
66
Figure 10.1: Marine Tourism – World Market
10
69
Figure 11.1: Ocean Survey – World Market
73
Figure 11.2: Ocean Survey – Regional Segmentation 2005–2009
73
Figure 11.3: Ocean Survey – European Segmentation
74
Figure 11.4: Ocean Survey – Sectors
74
Figure 12.1: Submarine Telecoms – World Market
79
Figure 12.2: Submarine Telecoms – Regional Segmentation 2005–2009
79
Figure 13.1: Fishing and Aquaculture Production
81
Figure 13.2: Fishing – World Market
81
Figure 13.3: Fishing – Regional Segmentation 2005–2009
82
Figure 14.1: Marine Aquaculture – World Market
85
Figure 14.2: Marine Aquaculture – Regional Segmentation 2005–2009
85
Figure 15.1: Seaweed – World Market
89
Figure 15.2: Seaweed – Regional Segmentation 2005–2009
89
Figure 16.1: Seafood Processing – World Market
91
Figure 16.2: Seafood Processing – Regional Segmentation 2005–2009
91
3
4
MARINE INDUSTRIES GLOBAL MARKET ANALYSIS
Figure 17.1: Offshore Oil & Gas – Global Expenditure
95
Figure 17.2: Offshore Oil & Gas – Regional Segmentation 2005–2009
95
Figure 17.3: Offshore Oil & Gas – European Expenditure
96
Figure 17.4: Subsea Field Development Costs
97
Figure 17.5: Deepwater Oil & Gas Production
98
Figure 17.6: Floating Production Expenditure Forecast
99
Figure 18.1: Marine Renewable Energy – Expenditure
101
Figure 18.2: Renewable Energy – Regional Segmentation 2005–2009
101
Figure 18.3: Offshore Windpower – European Capital Expenditure
102
Figure 18.4: Offshore Wind Turbine Size
102
Figure 19.1: Minerals & Aggregates – World Market
105
Figure 19.2: Minerals & Aggregates – Regional Segmentation 2005–2009
105
Figure 20.1: Shipbuilding – World Market
107
Figure 20.2: Shipbuilding – Main Regional Segmentation 2005–2009
107
Figure 21.1: Marine Equipment – World Market
111
Figure 21.2: Marine Equipment – Regional Segmentation 2005–2009
111
Figure 21.3: Typical Ship Cost Segmentation
112
Figure 22.1: Marine IT – Major Sectors
113
Figure 22.2: Marine IT – World Market
113
Figure 22.3: Marine IT – Regional Segmentation 2005–2009
114
Figure 23.1: Marine Biotechnology – World Market
117
Figure 24.1: Education & Training – World Market
121
Figure 25.2: R&D – Regional Segmentation 2005–2009
123
Figure 25.3: Marine R&D by Sector
124
Figure 25.4: Marine R&D by Region
124
MARINE INDUSTRIES GLOBAL MARKET ANALYSIS
Tables
Table 3.1:
World Marine Sectors – Value and Growth (Ranking 2005–09)
24
Table 3.2:
Marine Sector Values – Euros and US dollars (Ranked by 2004 values)
28
Table 6.1:
Shipping – World Market
52
Table 6.2:
Top 25 Shipowners – Tonnage
54
Table 6.3:
Controlled & Registered Fleets
55
Table 6.4:
Annual Average Growth Rate (%)
56
Table 7.1:
Marine Commerce – World Market
57
Table 7.2:
Companies in London’s Marine Commerce Cluster
58
Table 8.1:
Ports – World Market
61
Table 8.2:
Top Eight Operators by TEU
62
Table 9.1:
Cruise – World Market
66
Table 9.2:
European Country Passenger Calls
67
Table 9.3:
European Ports Passenger Calls
67
Table 9.4:
Cruise Ships by Owner (end 2003)
67
Table 10.1:
Marine Tourism – Industry Segmentation 2003 (€ millions)
69
Table 11.1:
Ocean Survey – World Market
73
Table 12.1:
Submarine Telecoms – World Market
79
Table 13.1:
Fishing – World Market
82
Table 14.1:
Marine Aquaculture – World Market
85
Table 15.1:
Seaweed – World Market
89
Table 16.1:
Seafood Processing – World Market
91
Table 17.1:
Oil & Gas – Expenditure Totals
Table 18.1:
Marine Renewable Energy – Totals
101
Table 19.2:
Electricity Generation Costs
104
Table 19.1:
Minerals & Aggregates – World Market
105
Table 20.1:
Shipbuilding – World Market
107
Table 21.1:
Marine Equipment – World Market
111
Table 22.1:
Marine IT – World Market
113
Table 25.1:
R&D – World Market
123
95
5
6
MARINE INDUSTRIES GLOBAL MARKET ANALYSIS
Abbreviations
AUV
Autonomous Underwater Vehicle
BIM
Bord Iascaigh Mhara (Irish sea fisheries board)
BMF
British Marine Federation
bn
Billion
Capex
Capital Expenditure
CFP
Common Fisheries Policy
CGT
Compensated Gross Tonnage
DGPS
Differential Global Positioning
DNA
Deoxyribonucleic Acid
DWT
Deadweight Tonnage
EEA
European Economic Area
EEZ
Exclusive Economic Zone
EU
European Union
FAO
Food and Agriculture Organisation (of the United Nations)
FPSO
Floating Production Storage and Offloading (Vessel)
FPSS
Floating Production Semi-submersible
GDP
Gross Domestic Product
GT
Gross Tonnes
GTL
Gas to Liquids
IMPACT
Global Model of Food Supply and Demand for 28 Commodities
ISM
International Management Code for the Safe Operation of Ships and for Pollution Prevention
ISPS
International Ship and Port Facility Security Code
ISL
Institute of Shipping Economics and Logistics
IT
Information Technology
LPG
Liquid Petroleum Gas
M&A
Merger & Acquisition
NOAA
National Oceanographic and Atmospheric Administration
OECD
Organisation for Economic Cooperation and Development
OPEC
Organisation of Petroleum Exporting Countries
Opex
Operational Expenditure
QSP
Quality Seafood Product
R&D
Research & Development
RNA
Ribonucleic Acid
ro-ro
Roll-on/roll-off (Road Transport Ferries)
ROV
Remotely Operated Vehicle
S&P
Survey and Positioning
SME
Small or Medium Sized Enterprise
TEU
Twenty Foot Equivalent Units (Container)
TLP
Tension Leg Platform
UNCLOS
United Nations Conference on the Law Of the Sea
UNCTAD
United Nations Conference on Trade and Development
VLCC
Very Large Crude Carrier (“super tanker”)
VTMS
Vessel Traffic Management System
WTO
World Trade Organisation
MARINE INDUSTRIES GLOBAL MARKET ANALYSIS
1 Douglas–Westwood
1.1 COMPANY BACKGROUND
Douglas-Westwood Limited is an independent consultancy that carries out strategic
business research, market modelling and analysis.Work is primarily commissioned
business research for the international energy and marine industries, their suppliers
and investors. Since its formation in 1990, DWL has completed over 340 projects,
involving 24 industrial marine sectors worldwide.The firm is UK-based but
results of its research is used by clients in 32 countries. Specific marine sector
clients range from government agencies worldwide to shipbuilders and international
marine equipment suppliers, from the offshore oil & gas majors to renewable
energy companies.
Douglas-Westwood’s major published work ranges from definitive technoeconomic sector studies on Marine Renewable Energy to Marine Propulsion
and Ocean Survey.
Douglas-Westwood Limited www.dw-1.com
7
8
MARINE INDUSTRIES GLOBAL MARKET ANALYSIS
MARINE INDUSTRIES GLOBAL MARKET ANALYSIS
2 Introduction & Objectives
2.1 OBJECTIVES
The Marine Institute is the national agency charged with co-ordinating, supporting
and undertaking marine research and development in Ireland.The Institute aims to
maximise the contribution of the marine resource to sustainable economic
development and employment growth.
The Institute is embarking on the development of a new National Marine Research
& Innovation Strategy for the Marine Sector in Ireland.This strategy will address the
period 2006-2012.
This report was commissioned by the Marine Institute and completed in March
2005. Its aims are to act as an input to the strategy development process and
specifically to provide the following:
• An estimate of the global market for marine activities in 2004 for sub-sectors
defined by the Institute.
• An estimate of the Irish share of the market.
• An assessment of regional market trends and outturns over the period 1999-2004.
• An estimate of the global market and growth prospects by sub-sector over the
period 2005–2009.
• Comments on factors that will impact in the longer term – to 2012.
2.2 LONG-TERM TRENDS
Most business forecasting is based on five years, i.e. 2005 – 2009 for which this report
gives quantitive forecasts.
We believe that the major factors that will impact on the marine sector over the
period to 2012 are as follows:
• Political & economic change.
• Globalisation.
• Population growth & demographic change.
• Energy supply and demand, and prices.
• Environmental concerns & responses.
• Global terrorism – threats & responses.
9
10
MARINE INDUSTRIES GLOBAL MARKET ANALYSIS
It is important to recognise that to some extent, all of the above are linked either in
cause or effect. Furthermore many of these major factors are often regarded as being
outside the normal remits of forecasting. However, result from long-term trends
which provide a backdrop to this report. Our overall view on these is as follows:
Globalisation will continue to be driven by the lower costs of the developing
countries and the ageing of populations in the developed world.This will result in an
increasing demand for commodity feedstocks, and for energy – particularly oil and
liquid fuels for transportation, perhaps increasingly derived from gas.
Energy supply – we believe that oil supplies have a potential to peak sometime after
2013 and if this occurs the consequences could be serious for world economic
growth. Some energy prices have already increased dramatically over the past three
years and in the light of such increases renewable energy could be a good long-term
investment.
Growing industrialisation is likely to have environmental impact and result in
increasing expenditure on remedial/preventative measures. However, we note that
there is already some awareness in China that their long-term development cannot be
based on the Western model.
Growing populations in the Middle East could, unless expectations are managed,
result in political change and further fuel political instability.
Disruption – during the last half of the 20th century a major disruption occurred
every five to seven years – it is unlikely that the period 2005–2012 will pass
without another.
MARINE INDUSTRIES GLOBAL MARKET ANALYSIS
11
3 Summary & Conclusions
3.1
MARKET SEGMENTATION
Figure 3.1: World Marine Industry Totals 2005–2009 (€ billion)
Services
Shipping
Marine Commerce
Ports
Cruise Industry
2454
1437
29
136
Marine Tourism
928
Resources
1306
Marine Fisheries
802
Energy
Ocean Survey
10
Fishing
250
Renewable
Submarine Telecoms
12
Aquaculture
134
Oil & Gas
67
Seaweed
Processing
Manufacturing
33
385
13
476
15
541
Shipping Building
155
Marine IT
16
Education & Research
Marine Equipment
358
Marine Biotechnology
12
Education & Training
The world marine industry can be divided into four main areas. After some major
items of double counting have been removed we estimate that these have the
following values over the period 2005–2009:
• Services. Valued at €2,454bn over the period 2005–2009 – dominated by the
shipping industry and tourism.
• Resources. Valued at €1,306bn over the period 2005–2009 – dominated by
Fisheries and Energy.1
• Manufacturing. Valued at €541bn over the period 2005–2009 – mainly production
of equipment for the Shipbuilding and Oil & Gas industries.
• Education and Research. Valued at €62bn over the period 2005–2009 – activities
associated with Education & Training and R&D for specific sub-sectors.
3.2 KEY DRIVERS OF CHANGE
Growth of the Chinese economy, and to a lesser extent other developing economies, has
caused considerable increases in both their demand for commodities and their exports.
The result has been an unprecedented growth in demand for shipping – large amounts
of new tonnage have been ordered and will be delivered in 2005–6.The question for
the future is whether there will then be excess capacity and depressed rates.
1
Minerals &
Aggregates
489
We exclude the value of the energy produced.
8
62
Research & Development 54
12
MARINE INDUSTRIES GLOBAL MARKET ANALYSIS
The increased demand for commodities has resulted in supply shortages and large
price rises in crude oil, steel and other metals.
The US has been importing increasing amounts of goods from China and its growing
balance of payments deficit has resulted in a fall in the value of the US dollar against
the Euro which has undermined Eurozone companies’ competitiveness.
Globalisation and the growth of low-cost manufacturing centres (China, India,
E. Europe) is having serious implications for developed countries as it becomes
increasingly necessary for some companies to re-locate production in order to remain
internationally competitive.
The aging and declining workforce in developed economies and high wage costs are
also pushing industries into locating production in the developing world.
Although there are costs for the marine industry arising from requirements to comply
with environmental legislation, this also generates benefits for technology providers.
Development of the renewable energy sector is but one example.
Global terrorism and associated security needs has resulted in development of new
‘markets’ in provision of products and services.
The strong growth in global energy demand, particularly from the developing
countries has boosted the offshore oil & gas sector but increasingly raises concerns
over a possible limit to oil supplies.
The interplay of the above factors means that marine industries are going through a
period of considerable change and this seems to be the likely pattern in the future.
3.3 WORLD MARKET SECTORS
Of the marine sectors analysed within the report, there are a few that stand out as
either being substantial in today’s market, or that are currently small but set for rapid
growth.The largest market in 2004 was the shipping and transport sector
(€343 billion), a position it will still hold through to 2009. However, it is forecast to
experience a decline in Euro terms over the period to 2009, averaging 1.8% per year
as shipping rates moderate somewhat. At the other end of the scale is the marine
renewable sector, valued in 2004 at only €128 million, but forecast to grow
dramatically, by almost 1,000% during the period, to €5.6 billion.These examples
illustrate the point that very small sectors may contain great opportunity for new
players and activity. Summaries of trends for all sectors are outlined in figure 3.2.
MARINE INDUSTRIES GLOBAL MARKET ANALYSIS
13
Figure 3.2: World Marine Industry Sector Totals 2005–2009 (€ billion)
3.4
SERVICES
SHIPPING & TRANSPORT
Page 51 (€343bn in 2004, €308bn in 2009)
Shipping and Transport is the largest marine sector, within Europe the cluster has
been estimated to comprise 10,000 companies2 and to form a market worth
€151 billion in 2004.The world market for the same year is estimated at €343
billion. Over 90,000 ships of 100 GT or more are registered and in excess of 50,000
are thought to be trading internationally. Of the 11,412 shipowners & operators
listed, Greece is the largest owner of tonnage.3
The UN has noted that: “It is generally considered that maritime capabilities,
specifically the ownership of substantial tonnage, are essential for countries’ trade
support and promotion”.4 It is estimated that more than 90% of world trade tonnage
is transported by sea and seaborne trade has grown by 400% in the past 40 years. Of
particular significance is the container sector, set to grow by a further 400% by 2022.
Shipping is a highly cyclical industry presently enjoying an unprecedented boom,
increasing 127% from 1999 (€151 billion) to 2004. However, it is likely that by 2006
additional capacity entering the market will cause rates to fall and we expect a return
to slower long-term trends from 2007.Therefore, by 2009 the market is forecast to be
valued at €308 billion, representing an average growth rate from 2005 of –1.8%.
2
Lloyd’s List p1, 27 Jan 2004.
3
Lloyd’s Register – Fairplay ‘World Shipping Directory’ 2004–05’
4
‘Review of Marine Transport 2003’ United Nations Conference on Trade and Development (UNCTAD)
1999–03
2004
2005–09
Irish Market €M
5,612
1,000
9,460
UK Market €M
61,161
20,442
86,201
452,186
151,137
637,315
Europe Market €M
World Market €M
1,011,600
342,743 1,436,684
14
Irish Market €M
MARINE INDUSTRIES GLOBAL MARKET ANALYSIS
1999–03
2004
2005–09
832
150
780
UK Market €M
10,429
1,842
9,595
Europe Market €M
58,695
10,478
54,569
World Market €M
141,979
25,017
135,526
PORTS
Page 61 (€25bn in 2004, €29bn in 2009)
The Ports sector worldwide was worth €25bn in 2004 with Europe’s share
amounting to €10.5 billion.There are over 8,000 ports & terminals worldwide
of which some 2,000 are significant. However, the top 50 handle the majority
of business.
Ports have major economic impact. In the case of Rotterdam, in 2003 5,741
persons were associated with cargo handling, 58,739 were in ‘direct port-related
employment’. It is claimed that the port generates indirect employment for
250,000 people.
Over the period 1999–2001 the sector increased to €31 billion, returning to previous
levels of €25 billion by 2004. Increasing seaborne trade and containerisation means
strong growth is underway with the sector forecast to be worth €29.3 billion in 2009,
representing 3.2% average annual growth from 2005–2009. However, port congestion
is looming and to tackle this major investments are needed in developing port
infrastructure worldwide.
Irish Market €M
UK Market €M
1999–03
2004
2005–09
209
55
217
5,636
1,477
5,846
Europe Market €M
10,437
2,736
10,826
World Market €M
26,092
6,840
28,670
MARINE COMMERCE
Page 57 (€7bn in 2004, €6bn in 2009)
The Marine Commerce sector was worth almost €7 billion in 2004, with Europe’s
share constituting €2.7 billion, 40% of world activity. ‘Marine Commerce’ is perhaps a
better description than the often-used term ‘Marine Services’, as the sector ranges
from ship operations, brokering and insurance to specialist publications.
This is a long-term growth sector, although the 2005–2009 average growth rate
shows a decline of 1.8% per year.This is due to a peak in activity in 2004 (and the
continued weakening of the dollar against the Euro) to €6.8 billion, following strong
growth in the previous two years. In 2005 activity returned to previous levels and
looks set for steady growth, with period growth forecast at 7%. Over the entire
reported period, the sector value is set to rise from €4.1 billion in 1999 to
€6.1 billion in 2009. London is still the world’s leading centre, but its position is
increasingly under threat from SE Asia (particularly Singapore). Marine commerce is
of major strategic importance as a successful centre tends to cluster decision makers
for many associated activities.
MARINE INDUSTRIES GLOBAL MARKET ANALYSIS
OCEAN SURVEY
Page 73 (€2bn in 2004, €2.1bn in 2009)
In 2004 the world value of ocean surveying was €2 billion with Europe representing
€538 million of this.The sector satisfies a continuing need for provision of up-to-date
charts essential for safe navigation. However, the largest commercial activity is in
surveys for the offshore oil & gas industry. Europe is a major player in this high tech
sector, which is dominated by one international company headquartered in the
Netherlands.There is also emerging market potential associated with the
commissioning of EEZ surveys and areas where Ireland has world-class experience
(having completed the world’s largest survey) but has no major commercial player.
15
1999–03
2004
2005–09
Irish Market €M
64
12
54
UK Market €M
608
104
517
Europe Market €M
3,201
538
2,722
World Market €M
11,715
2,013
10,137
1999–03
2004
2005–09
–
–
–
The world market exhibits a long-term growth trend (if analysed in US dollars, but is
stable if represented in Euros, due to the decline in value of the dollar over time in
relation to the Euro.)
SUBMARINE TELECOMS
Page 79 (€1bn in 2004, €3bn in 2009)
In 2004 the industry is valued at €1bn, after a €7bn capital expenditure peak in 2001
which was followed by a market collapse in 2001–2.This was due to the combined
effects of the ending of the ‘dotcom’ stock market boom and improvement in
technology which increased cable bandwidth.The collapse also impacted on some oil
& gas service sectors, as cable installation contractors tried to re-deploy resources.
Irish Market €M
UK Market €M
–
–
–
3312
185
1915
21,270
1,126
11,646
1999–03
2004
2005–09
709
155
848
–
–
–
Europe Market €M
328,302
71,812
392,695
World Market €M
762,345
168,189
928,267
Europe Market €M
World Market €M
As a global business that views its markets by oceans, this sector is difficult to segment
by country or region, but the value of the European share in 2004 is €185 million,
constituting 16% of the world. Slow long-term growth is now forecast for submarine
cable installations, to €3bn in 2009, representing average annual growth of 21.8%
from 2005.
MARINE TOURISM
Page 69 (€168bn in 2004, €198bn in 2009)
Marine tourism is the second largest marine sector in the world and we estimate its
value to have been €168bn in 2004. Marine tourism is defined as angling, coastal and
inland leisure boating, water sports and cruise liner holidays. Europe is an important
market for marine tourism, valued at €72 billion in 2004.
Irish Market €M
UK Market €M
16
MARINE INDUSTRIES GLOBAL MARKET ANALYSIS
The marine leisure sector is forecast to enjoy continuing long-term growth in line
with the overall increase in tourism and leisure activity to €198 billion in 2009,
representing 3.3% annual growth from 2005.This is based on the historical trend
exhibited by tourism as a whole (marine and land-based), from an annual value of
€142 billion in 1999.
1999–03
2004
2005–09
–
66
–
5,220
1,104
6,458
Europe Market €M
11,178
2,365
13,829
World Market €M
54,570
12,000
67,436
Irish Market €M
UK Market €M
CRUISE INDUSTRY
Page 65 (€12bn in 2004, €15bn in 2009)
The world revenues for cruise sector operators was estimated at €12bn in 2004, with
Europe’s share constituting €2.4 billion.The sector offers large potential with major
investments being made in cruise terminals worldwide.Total economic benefit delivered
by the industry is considerable. Although dominated by the US market which accounts
for more than 70% of passengers. It is of note that 2.7 million Europeans took cruise
holidays in 2003 and of these 2 million were in European waters.5
From being worth €7.7 billion in 1999 the sector has grown by 56%. Further strong
growth is expected globally and regionally, with European cruise passengers increasing
to 4 million in 10 years.There is significant growth of smaller specialised cruises in
Northern European waters, resulting in an overall 4.4% average annual growth during
the forecast period to €14.8 billion in 2009.
In Ireland, ship visits increased from 77 in 2000 to 127 in 2003. Cork and Dublin had
in total 75,124 passenger ‘calls’ in 2004 (compared with Southampton with 536,4936)
out of a European total of 4.3 million.7 Purchases of goods and services in Ireland
totalled €66 million sustaining 484 full time jobs.8
3.5 MARINE FISHERIES
This area includes capture fishing, marine aquaculture, seaweed and
seafood processing.
1999–03
2004
2005–09
951
176
788
4,338
678
3,033
Europe Market €M
32,313
4,758
21,280
World Market €M
362,035
55,983
250,386
Irish Market €M
UK Market €M
FISHING
Page 81 (€56bn in 2004, €49bn in 2009)
World marine capture fisheries production was valued at €56 billion in 2004, with
Europe representing 8% of this (€4.8 billion).This is an important industry with
strong market demand.
5
European Cruise Council 2004 (first statistics).
6
Southampton has a cruise liner terminal and is a turnaround port for a number of cruise liners, thus accounting for the large
number of passenger “calls”.
7
GP Wild reported in ‘Lloyd’s Cruise International’, Aug/Sept 2004.
MARINE INDUSTRIES GLOBAL MARKET ANALYSIS
17
Historically, production value was €67 billion, and is forecast to fall to €49 billion by
2009 as a result of declining catch tonnage worldwide caused by serious resource
problems and resulting quota restrictions.There are some opportunities offered by
‘new’ (previously unexploited) species. Nevertheless, the industry faces a future of
continuing global decline worldwide until a point of sustainability can be reached.
This decline is forecast at a rate of 2.5% per year in Euros (1% in US Dollars).
MARINE AQUACULTURE
Page 85 (€24bn in 2004, €29bn in 2009)
Marine aquaculture production was valued at €24bn in 2004, with Europe taking
a relatively small share at €3.5 billion. Environmental issues and scares have at times
depressed demand, within Europe and globally, but the industry has always
recovered quickly. Norway leads European production and benefits from a strong
international brand.
Irish Market €M
UK Market €M
1999–03
2004
2005–09
496
111
623
2,383
554
3,119
Europe Market €M
16,359
3,483
19,621
World Market €M
104,220
23,876
134,492
1999–03
2004
2005–09
10
–
–
–
–
–
Between 1996 and 2002 tonnage growth was 9% p.a. and $ value growth 4% p.a.
Continuing strong future growth in demand is forecast.There are opportunities for
new species development and research opportunities in a number of areas.
As a whole, the industry is experiencing a long-term growth trend, partially associated
with filling the capture fishing gap, but also due to the low price of its products. (SE
Asia is a low-cost high-volume producer, with annual average forecast growth
expected at 4%, reaching €29 billion in 2009.)
SEAWEED
Page 89 (€6bn in 2004, €7bn in 2009)
The world seaweed value of wild and cultivated product was €6 billion in 2004. In
Europe, seaweed aquaculture has only developed to any commercial extent in France
where wakame is being grown for food, although this is not recorded in international
data. Irish data shows that in 2002 the country’s production was valued at €10
million, but again, this data is not included in international data.
This surprisingly large sector is dominated by China (which produces 75% but is still
a net importer) and other Asian producers (15%).The farming of seaweed has
expanded rapidly as demand has outstripped the supply available from natural
resources. Commercial harvesting occurs in about 35 countries, both in the Northern
and Southern Hemispheres.9
8
‘Report to Cruise Ireland’, March 2004. (If applied across all of Europe then a total economic benefit of 3.7bn is suggested).
9
FAO: ‘A Guide to the Seaweed Industry’ 2003.
Irish Market €M
UK Market €M
Europe Market €M
World Market €M
–
–
–
28,490
5,988
32,746
18
MARINE INDUSTRIES GLOBAL MARKET ANALYSIS
At the start of the reported period seaweed production was valued at €6.4 billion,
then dipped in 2000, but the following years have all seen growth, with the 2000
value of production forecast to be reached again in 2006. Forecast annual growth over
the period 2005–2009 is estimated at 3%.
Irish Market €M
UK Market €M
1999–03
2004
2005–09
1,447
287
1,411
6,721
1,232
6,152
Europe Market €M
48,671
8,241
40,901
World Market €M
466,254
79,859
384,878
FISH/SEAFOOD PROCESSING
Page 91 (€80bn in 2004, €78 in 2009)
In 2004 the seafood processing industry is estimated to have been worth €80bn.This
is based on the assumption that processing can add up to 100% to the overall value of
the raw product (based on analysis of limited data).The main driver is consumers’
increasing preference for convenience foods, resulting in more value being added to
the raw product.
A considerable export market exists for processed seafoods and high cost European
processors, such as Norway, are greatly aided by the establishment and development of
a premium brand. A challenge for smaller producers such as Ireland is the need to
develop/invest in automation and increase volumes to achieve economies of scale.
Historical and forecast values are based on the stated trends for the fishing and
aquaculture sectors (i.e. the availability of the raw product). As a result the industry is
forecast to decline, but towards the end of the period the impact in the increase of
aquaculture production leads to a slight upturn, but not to levels previously reached.
Forecast average annual growth for 2005–2009 is therefore still negative, but only
marginally so at –0.4%.
3.6 ENERGY
The marine energy sector is dominated by oil and gas, but growth is beginning in the
offshore renewable energy sector.
Irish Market €M
UK Market €M
1999–03
2004
2005–09
478
114
483
54,699
7,927
30,751
Europe Market €M
133,583
19,112
81,681
World Market €M
504,110
91,146
475,748
OFFSHORE OIL & GAS
Page 95 (€91bn expenditure in 2004, €99bn in 2009)
Expenditure in 2004 was €91 billion worldwide with Europe accounting for
€19 billion. Offshore oil and gas is probably the world’s largest marine industry in
terms of the value of its output (the oil & gas produced), which we estimate was
some €700bn in 2004.
MARINE INDUSTRIES GLOBAL MARKET ANALYSIS
19
Historically, there was an expenditure peak in 2001 of €100 billion, in part due to
exchange rate differences caused by valuing a dollar-based market in Euros.
Nevertheless, even when valued in Euros, growth is forecast.
The sector is benefiting from a long-term growth in demand and increased oil & gas
prices and gas is growing in importance as a fuel. Shallow water producing regions are
now in decline (although many small fields remain) causing major oil and gas
companies to move to deepwater areas. However, operational spend is still growing in
most regions. As numbers of shallow water fixed platform installations decline there is
an increase in the use of floating production systems and subsea production. All these
drivers are leading to 1.7% growth per year from 2005 to 2009 globally, although
Europe is mature with oil production in long-term decline.
MARINE RENEWABLE ENERGY
Page 101 (€0.1bn in 2004, €6bn in 2009)
This tiny new industry was valued globally at €128 million in 2004, with the vast
majority of this spend in Europe (€121 million).
1999–03
2004
2005–09
Irish Market €M
46
–
255
UK Market €M
108
109
3,356
Europe Market €M
738
121
11103
World Market €M
741
128
12,649
1999–03
2004
2005–09
It displays the largest growth of any sector and should increase to nearly €6 billion
by 2009, representing 131% average annual growth rate 2005 to 2009 (987% over the
forecast period). 99% of expenditure will be on wind farms with 2,258 turbines
(totalling 7.5 GW) forecast to be installed over the period.There is also embryonic
wave and tidal activity.
Europe will account for 85% of the forecast capital expenditure.The UK will develop
first (with 26% of total expenditure to 2009) then Germany will follow on and
achieve 40% of total five-year expenditure. European technology leads the world, but
the challenge is to reduce costs by use of large 5 MW turbines involving increased
distances from the shore and water depths. Ireland has one development to date, but a
world-class natural resource.
MINERALS & AGGREGATES
Page 105 (€2.7bn in 2004, €3.1bn in 2009)
The world value of the industry is estimated at €2.7 billion in 2004, with Japan
reported to be the largest producer.Within Europe, valued at €1.3 billion in 2004, the
UK dominates, with the industry employing 2,500 people.The sector is dominated
by the production of aggregates which are supplied to local markets, with offshore
Irish Market €M
UK Market €M
–
–
–
3,008
672
3,648
Europe Market €M
5,761
1,344
6,938
World Market €M
11,746
2,741
14,149
20
MARINE INDUSTRIES GLOBAL MARKET ANALYSIS
dredging reducing the need for onshore pits bringing certain environmental benefits.
Historically the sector has displayed steady growth through to 2004, from €2.3 billion
in 1999.The forecast is for growth, averaging 2.7% leading to a value of €3.1 billion
in 2009.
3.7
1999–03
2004
2005–09
2
0
2
1,001
234
928
Europe Market €M
63,913
13,143
52,076
World Market €M
183,440
37,746
155,017
Irish Market €M
UK Market €M
MANUFACTURING
SHIPBUILDING
Page 107 (€38bn in 2004, €30bn in 2009)
The shipbuilding industry was valued at €38 billion in 2004, with Europe’s
€13 billion share being significant, some one third of this.
1,430 shipbuilders and repairers are listed worldwide, but there is a history of overinvestment and subsidy. As a result, Asia dominates the ‘bulk’ vessel market, but the
emergence of China as a shipbuilder now threatens the main players, Japan & Korea.
Europe is associated with higher tech, low volume vessels (cruise, offshore, etc), but
the high value of the Euro has major impact on EU shipbuilders and their suppliers.
Ireland is not a significant player.
From a value of €31.9 billion in 1999 the sector peaked (in Euro terms) in 2002 at
€40 billion.This peak, we believe, will be followed by a return to long-term lower
growth trends, with a market value similar at the end of the forecast period, to the
start of the historic period.Therefore, the forecast annual growth rate for 2005–2009
in Euros is –4%, representing the return to previous levels of activity.
Irish Market €M
UK Market €M
1999–03
2004
2005–09
1
0
1
571
133
529
Europe Market €M
94,721
16,675
73,263
World Market €M
355,826
72,871
358,315
MARINE EQUIPMENT
Page 111 (€73bn in 2004, €70bn in 2009)
This is a very large market (€73 billion in 2004) and although other smaller sectors
could also be included there are two main segments:
• Shipbuilding, where items such as propulsion systems & machinery total €21bn
with over 5,000 suppliers listed worldwide.
• Oil & gas sector, where capital items such as platforms, pipelines, subsea equipment,
etc. total €49bn and over 6,000 suppliers are listed worldwide.
The market was worth €64 billion in 1999. Since then, the sector has displayed slight
fluctuations, but a general trend of growth, with forecast value of €70 billion for
MARINE INDUSTRIES GLOBAL MARKET ANALYSIS
21
2009, representing a slight decline of 0.6% annually from 2005 following a peak of
€74 billion in 2006.This is due to a forecast slight decline in shipbuilding.
There is growing technology content and hundreds of high-tech sub-sectors, many of
which offer opportunities.
MARINE IT
Page 113 (€3.4bn in 2004, €3.4bn in 2009)
In 2004 the world value of Marine IT was €3.6 billion. Europe’s share was
€1.4 billion, amounting to nearly 40% of the world market.
There are more than 500 suppliers of ‘marine computing’ worldwide (mainly SMEs,
plus many leisure sector players). IT hardware & software applies to, and is embedded
in all aspects of marine activity so it is difficult to value.The major sectors are ship
operations (e.g. integrated bridge), equipment support (e.g. engine management),
marine operations (e.g. cargo handling) and design.
1999–03
2004
2005–09
Irish Market €M
43
18
78
UK Market €M
648
217
917
Europe Market €M
3,794
1,382
5,872
World Market €M
9,780
3,570
16,012
Marine IT has grown substantially from €1.3 billion in 1999.There is an overall longterm increase in IT content in the marine sector and it could hold significant
potential for Ireland. Globally, the sector is set for its long-term steady growth to
continue; however, after a peak in 2004, annual growth is forecast at –0.9%, although
total period growth 2005–2009 is 7%.
MARINE BIOTECHNOLOGY
Page 113 (€2.2bn in 2004, €2.6bn in 2009)
In 2004 the global value of marine biotechnology was €2.2 billion. As the sector is in
the early stages of its development, there is at present insufficient information on
which to base country or regional segmentation of these estimates.
80% of living organisms are found only in aquatic ecosystems, yet little is known
about their biochemical characteristics.This is a new sector with considerable interest
being shown by the US, Japan, the UK and others.There have been some initial
successes (the US Sea Grant programme, with small investments, developed five drugs
“with market potential of $2bn p.a.”) and considerable long-term potential beyond
the timeframe of this report.
1999–03
2004
2005–09
Irish market €M
–
–
–
UK market €M
–
–
–
Europe market €M
–
–
–
11,350
2,190
11,848
World market €M
22
MARINE INDUSTRIES GLOBAL MARKET ANALYSIS
The long-term potential of the sector is very large, arguably greater than conventional
(non-marine) biotechnology activity which in 2002 generated $35.8 billion of
revenues. Annual average growth 2005–2009 is estimated at 3.8%, with a total growth
rate of 24% over the forecast period.
“One of the most exciting emerging technology sectors.”10
3.8
1999–03
2004
2005–09
Irish Market €M
–
–
–
UK Market €M
–
–
–
Europe Market €M
–
–
–
10,041
1,537
7,691
World Market €M
EDUCATION AND RESEARCH
EDUCATION & TRAINING
Page 121 (>€1.5bn in 2004, €1.6bn in 2009)
Worth €1.5bn in 2004, the sector has three primary activities: seafarer training,
offshore workers and higher education. As training may be provided in one country
to meet demand from other countries, it is not feasible to segment the ‘market’ by
countries or regions.
• Seafarer training – 400,000 officers and 825,000 ratings are employed worldwide
with 60% of the latter being from the Asia Pacific region. 418 ‘maritime schools’ are
listed worldwide and there has been a 27% oversupply of ratings recently (mainly
Philippinos). At the same time there is a 4% undersupply of officers which is
expected to rise to 12% by 2010. Seafarer training costs range from $5–20K,
officers $40K and we estimate that during the period 2005–9 the number of
people requiring training will be 177,000.
• Offshore workers undergo safety training on a four year cycle.With an estimated
80,000 workers worldwide, some 20,000 are trained per annum.
• Higher education establishments offering marine courses total at least 241
worldwide. However, it is difficult to estimate the associated expenditure in this area.
All education and training has a role in ‘marketing’ the supplier country and its
technology to foreign students. (The new National Maritime College of Ireland,
located in Cork, offers a wide range of courses geared specifically towards the
commercial shipping sector and the navy.)
Due in part to a recent over-supply of seafarers being trained, historic levels of
activity have declined slightly to 2004.This is due to be followed by a slight upturn
with other areas within the sector seeing growth, resulting in annual average growth
of 1.5% over the period 2005–2009.
10
Report to the UK Foresight Marine Panel, January 05.
MARINE INDUSTRIES GLOBAL MARKET ANALYSIS
RESEARCH & DEVELOPMENT
Page 123 (€11bn in 2004, €11bn in 2009)
The Marine R&D sector was valued at €11bn in 2004 with Europe’s share of
the world market exceeding €3.2 billion in 2004. A number of areas make up this
global value.
• We currently value shipbuilding R&D at €1.8bn – its growth mainly a function
of future increases in shipbuilding revenues.
• The oil & gas industry is estimated to spend €2.5bn, but in future years this
increase will be a function of the technical challenges that will be faced.
• Other marine industries, we believe, total €1bn.
• Governments are major spenders with over 1,200 ‘research’ vessels worldwide.
The US leads and the National Oceanographic and Atmospheric Administration’s
(NOAA) marine budget we estimate at €2bn. Other governments probably total
of the order of €3bn.The response to global warming is likely to increase this
spend. (Our figures exclude the important military naval sector where the US
alone accounts for $13bn and the world total could be €26bn.)
Historically, activity has been fairly constant with forecast growth estimated at 1.4%
annually from 2005 through to 2009.
23
1999–03
Irish Market €M
2004
2005–09
325
62
329
3,252
621
3,294
Europe Market €M
15,742
3,273
16,471
World Market €M
50,484
10,629
54,320
UK Market €M
24
MARINE INDUSTRIES GLOBAL MARKET ANALYSIS
Table 3.1: World Marine Sectors – Value and Growth (Ranking 2005–09)
Euros million
Shipping & Transport
Marine Tourism
Annual
Growth
Total
Growth
Irish
Share
99–03
2004
05–09
2005 to 09
2005 to 09
2004
1,011,600
342,743
1,436,684
–1.8%
7%
0.29%
762,345
168,189
928,267
3.3%
14%
0.09%
Offshore Oil & Gas
504,110
91,146
476,044
1.7%
12%
0.13%
Seafood Processing
466,254
79,859
384,878
–0.4%
3%
0.37%
Marine Equipment
355,826
72,871
358,315
–0.6%
–1%
0.00%
Fishing
362,035
55,983
250,386
–2.5%
–4%
0.33%
Shipbuilding
183,440
37,746
155,017
–4.0%
–10%
0.00%
Ports
141,979
25,017
135,526
3.2%
18%
0.60%
Marine Aquaculture
104,220
23,876
134,492
4.0%
17%
0.46%
Cruise Industry
54,570
12,000
67,436
4.4%
24%
0.55%
Research & Development
50,484
10,629
54,320
1.4%
10%
0.81%
Seaweed
28,490
5,988
32,746
3.0%
13%
0.00%
Marine Commerce
26,092
6,840
28,670
–1.8%
7%
0.80%
Marine IT
9,780
3,570
16,012
–0.9%
7%
0.50%
12,268
2,741
14,878
2.7%
11%
0.00%
741
128
12,649
131.4%
987%
0.00%
Marine Biotechnology
11,350
2,190
11,848
3.8%
24%
0.00%
Submarine Telecoms
21,270
1,126
11,646
21.8%
97%
0.00%
Ocean Survey
11,715
2,013
10,137
1.3%
11%
0.61%
Education & Training
10,041
1,537
7,691
1.5%
14%
0.00%
Minerals & Aggregates
Renewable Energy
3.4 CONCLUSIONS
Marine industries are of major economic importance. Although many of the
sectors are large, they often deliver economic benefits that are multiples ranging
from 2 to 10 times the values of direct spend we give in this report.
The above table 3.1 shows that the marine sectors range greatly in size.The largest
ones such as shipping, marine tourism and oil & gas (“traditional areas”) offer many
niche opportunities and existing world markets. Some very small ones such as marine
biotechnology and renewable energy have very high growth prospects and
investments in these could offer a large return.
It has been estimated that the European maritime cluster generates employment for
MARINE INDUSTRIES GLOBAL MARKET ANALYSIS
almost 1.5 million people. In terms of direct value added, the United Kingdom has
the largest maritime cluster, closely followed by Germany and Norway.11
However, some small countries such as Greece, Denmark and the Netherlands have
developed major marine industries. As a small country, in 2004 Ireland had a
correspondingly small share of world markets, largest in the key sectors of research &
development and marine commerce.
We believe that the future potential a small country such as Ireland lies in sectors that
are ‘internationally mobile’ and therefore receptive to advantageous tax regimes,
and/or would benefit from application of new technology; or are particularly suited
to Ireland’s natural environment. For example:
• Aquaculture – a growth sector where Ireland can be promoted as a ‘green and
clean’ producer.
• Maritime commerce – focused around Dublin’s shipping and financial community.
This however needs an attractive taxation environment.
• Marine renewable energy – Ireland has an outstanding wind, wave and tidal regime.
• Marine technology and biotechnology – capitalising on Ireland’s attractions
as a location for technological investments.
• Marine education – Ireland has made training investments and has a reputation
for academic excellence.
• Ocean survey – specifically related to building on Ireland’s recent EEZ
survey experience.
• Tourism – as cruise industry and watersports customers seek new destinations.
In developing any strategy for the marine industries it is important to recognise the
significance of commercial initiatives (as opposed to research initiatives), particularly
within the “traditional sub-sectors”. Examples of countries which have developed
positions of commercial leadership include Greece with the highest ownership of the
world’s ship tonnage, Germany in regard to container vessels, Denmark which
operates twice its owned tonnage and is a world leader in the manufacture of wind
energy technology, the UK in marine commerce (Greek shipping is mainly Londonbased), and the Netherlands in ports and ocean survey (it claims some 11,800
companies active in marine sectors).12 In comparison it has been noted that “New
York declined as a marine cluster due to tax changes”.
11
‘The Economic Impact of Maritime Industries in Europe’, Policy Research Corporation NV for the European Commission, 2002.
12
http://www.kvnr.nl/kvnr/engels.asp
25
26
MARINE INDUSTRIES GLOBAL MARKET ANALYSIS
As a small country, Ireland is not limited by having a major share of any world market
sector, so in many instances, with application of the correct strategy, there is potential
for growth. However, Ireland is limited in marine technology by the lack of a defence
sector and predominance of small companies.Therefore niche opportunities must be
carefully selected.
Ireland has been successful in attracting high technology companies, such as major
players in software and pharmaceuticals. It is now necessary to attract key players in
the marine sector and the involvement of the Irish Development Authority (IDA) is
vital to such a process. In this respect the Irish ‘patented product’ tax laws could be
helpful in attracting more investment.
The presence of multinationals tends to result in cluster development, both to service
them and also spin-off companies, the overall result being creation of jobs.
To maximise its potential, Ireland must become perceived as a good place to do
(marine sector) business. It is essential to understand and promote the advantages of
doing business from a location in Ireland.
A highly skilled workforce provides an opportunity for technology development in
key growth areas.
Internationally perceived Irish strengths include a positive image, high IT skills,
English language and being fully ‘European’.
Opportunities for Ireland can be considered as being in two areas – technical
and commercial.
There is no fundamental reason why Dublin could not be developed into a significant
centre of marine finance and commerce by building on its activities in the
financial sector and of the existing maritime companies, and by developing initiatives
to attract more.
A centre for marine technology and education could be developed in perhaps
another location where there is already marine research and/or educational activity.
One possibility that warrants further consideration is a centre for research into marine
renewable energy, which could be developed further into a physical Centre of
Excellence in Marine Technology. However, high level political support would be
essential. Models that may be relevant are the Southampton Oceanography Centre
and the Scripps Institute in the US.
MARINE INDUSTRIES GLOBAL MARKET ANALYSIS
A key need is to identify areas for R&D that results in both products and in
intellectual property development. In the main, the focus needs to be into
development of a small number of niche markets. Examples may include Marine IT,
Ocean Environmental Monitoring (sensors and data systems), Biotechnology,
Renewable Energy, etc.
It is essential to develop and maintain a knowledge base in the selected key areas by
means such as research fellowships, for example.
Marine IT may be particularly well suited to Ireland, but further research is needed to
identify specific medium-term opportunities.
A significant weakness is probably the low international awareness of Irish marine
activities. Ireland needs a maritime ‘brand’.This is particularly the case at sector
level. (Norway, for example, has very high brand recognition for its seafood in major
international markets such as the US.)
Above all, Ireland needs high visibility long-term government support of its marine
industries and marketing, both internally to raise awareness of marine opportunities
and externally to attract foreign key companies.
Once a strategy is developed it is essential to market it, both nationally and
internationally.
27
28
MARINE INDUSTRIES GLOBAL MARKET ANALYSIS
Table 3.2: Marine Sector Values – Euros and US Dollars (Ranked by 2004 Values)
Marine Sector Values – Euros
Euros Millions
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
Shipping & Transport
150,754
217,087
216,265
184,495
243,000
342,743
287,748
275,467
274,653
290,886
307,930
Marine Tourism
142,467
147,290
152,288
157,471
162,829
168,189
173,739
179,487
185,440
191,606
197,995
Offshore Oil & Gas
87,141
104,532
109,700
108,022
94,715
91,146
88,237
93,544
97,132
98,011
99,119
Seafood Processing
83,992
99,686
100,432
97,108
85,037
79,859
75,813
76,350
76,930
77,556
78,229
Marine Equipment
64,098
72,141
73,559
74,978
71,052
72,871
70,654
74,078
73,301
70,531
69,751
Marine Fishing
67,495
79,309
78,118
75,034
62,079
55,983
50,983
50,526
50,073
49,625
49,180
Shipbuilding
31,885
37,000
38,090
39,494
36,971
37,746
32,744
33,141
30,835
28,716
29,582
Ports
25,331
30,283
31,071
29,664
25,630
25,017
24,827
26,068
27,111
28,196
29,324
Marine Aquaculture
16,497
20,377
22,313
22,074
22,957
23,876
24,831
25,824
26,857
27,931
29,049
7,749
10,483
12,079
12,474
11,785
12,000
11,993
12,803
13,556
14,240
14,845
11,404
Cruise Industry
R&D
10,202
9,982
10,041
10,100
10,160
10,629
10,346
10,757
10,803
11,010
Marine Commerce
4,154
5,533
5,115
5,292
5,997
6,840
5,742
5,497
5,481
5,805
6,145
Seaweed
6,442
5,074
5,506
5,654
5,814
5,988
6,168
6,353
6,544
6,740
6,942
Marine IT
1,304
1,845
2,023
2,015
2,592
3,570
3,159
3,115
3,122
3,236
3,380
Minerals & Aggregates
2,297
2,375
2,454
2,532
2,610
2,741
2,819
2,897
2,976
3,054
3,132
Marine Biotechnology
1,768
2,212
2,500
2,588
2,282
2,190
2,123
2,240
2,363
2,493
2,630
Ocean Survey
2,020
2,497
2,601
2,465
2,133
2,013
1,925
1,964
2,022
2,082
2,144
Education & Training
1,733
2,193
2,344
2,203
1,568
1,537
1,449
1,479
1,531
1,584
1,649
Submarine Telecoms
4,816
3,919
7,193
4,591
751
1,126
1,502
2,065
2,441
2,685
2,953
–
15
71
234
421
128
514
1,365
2,327
2,857
5,586
Renewable Energy
MARINE INDUSTRIES GLOBAL MARKET ANALYSIS
29
Marine Sector Values – US Dollars
US$ Millions
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
Shipping & Transport
160,598
200,412
193,595
174,414
274,950
426,297
389,481
372,857
371,756
393,727
416,797
Marine Tourism
151,771
135,976
136,325
148,867
184,237
209,190
235,164
242,944
251,002
259,348
267,995
Offshore Oil & Gas
92,831
96,503
98,200
102,120
107,168
113,366
119,433
126,616
131,473
132,663
134,163
Seafood Processing
89,477
92,029
89,904
91,802
96,217
99,327
102,617
103,343
104,129
104,975
105,886
Marine Equipment
68,283
66,600
65,848
70,881
80,393
90,636
95,634
100,267
99,217
95,467
94,411
Marine Fishing
71,903
73,217
69,930
70,934
70,242
69,631
69,007
68,389
67,776
67,169
66,567
Shipbuilding
33,968
34,158
34,097
37,336
41,832
46,948
44,320
44,857
41,737
38,868
40,040
Ports
26,985
27,957
27,814
28,043
29,000
31,115
33,605
35,285
36,696
38,164
39,691
Marine Aquaculture
17,575
18,812
19,974
20,868
25,976
29,696
33,610
34,954
36,352
37,806
39,319
8,255
9,678
10,813
11,793
13,335
14,925
16,233
17,329
18,348
19,275
20,093
15,435
Cruise Industry
R&D
10,868
9,215
8,988
9,548
11,496
13,221
14,004
14,559
14,623
14,903
Marine Commerce
4,426
5,108
4,579
5,003
6,785
8,507
7,772
7,441
7,419
7,857
8,317
Seaweed
6,863
4,684
4,929
5,345
6,578
7,448
8,349
8,599
8,857
9,123
9,396
Marine IT
1,390
1,703
1,811
1,905
2,933
4,441
4,276
4,216
4,226
4,380
4,574
Minerals & Aggregates
2,447
2,193
2,196
2,394
2,953
3,409
3,816
3,922
4,028
4,134
4,239
Marine Biotechnology
1,883
2,042
2,238
2,447
2,582
2,724
2,873
3,031
3,198
3,374
3,560
Ocean Survey
2,152
2,305
2,328
2,330
2,413
2,504
2,605
2,658
2,737
2,818
2,903
Education & Training
1,846
2,024
2,099
2,082
1,775
1,911
1,961
2,001
2,072
2,144
2,232
Submarine Telecoms
5,131
3,618
6,439
4,340
850
1,401
2,033
2,795
3,303
3,634
3,997
Renewable Energy
Exchange Rate
–
14
63
221
476
159
696
1,847
3,150
3,867
7,562
0.94
1.08
1.1
1.06
0.88
0.80
0.74
0.74
0.74
0.74
0.74
Exchange rates – Over the past five years there have been major variation in
exchange rates, in particular the US dollar against the Euro is of great importance as
activity in the marine industries is mainly denominated in US dollars. Between 2002
and 2004 the US dollar has fallen and the Euro risen against major currencies.The
effect of this can be to change a market that has grown in US dollars into a decline
when measured in euros.
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MARINE INDUSTRIES GLOBAL MARKET ANALYSIS
MARINE INDUSTRIES GLOBAL MARKET ANALYSIS
4 Methodology & Definitions
4.1 INTRODUCTION
No industrial sector is an isolated economic activity and many of the forecasts for
individual sectors are in reality interlinked. For example:
• Shipbuilding is a key forecast as its results also feed into shipping, marine
equipment and marine IT.
• Shipping itself drives activity in marine commerce and ports.
• Offshore oil & gas expenditure also feeds part of the marine equipment sector.
• Ocean survey is driven by activity in offshore oil & gas and ports, and to a lesser
extent submarine telecoms and marine renewable energy.
Most significantly, virtually all are a function of global economic activity and the
factor having greatest impact on this is political action.
Forecasts of the future are reliant upon knowledge of the present and the past.
In some cases up-to-date values can be difficult to obtain due to the delay in
publication of official statistics.
It is important to note that our forecasts are based on the same processes that we use
in forecasting for our commercial clients – what might reasonably be achieved taking
into account fundamental market drivers and competition in a sector – in other
words, our aim is to generate realistic forecasts that could be used as a basis for
business planning.Where there is a choice we err on the side of caution as we are not
aiming to state maximum potential growth, other methodologies may result in
higher values.
4.2
METHODOLOGY BY SECTOR
SHIPPING
We have developed a $ value for the total world shipping industry for 2003 by using
tonnage shares to scale-up from official figures published by individual countries’
shipping industries.
The main market driver of shipping industry is the tonnage of seaborne trade
(import & export), the volume of which changes as a function of nations’ GDP.
Shipping activity is measured in tonne-miles for which we have used the ClarkSea
index and made tonne-miles projections based on GDP growth taken from IMF
and other forecasters.
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MARINE INDUSTRIES GLOBAL MARKET ANALYSIS
The volume of trade impacts on availability of vessels and, hence, vessel charter rates.
In effect, a relatively small increase in demand can result in a large increase in
shipping rates (and vice versa) and the value of the shipping sector.
In a rising market ship owner confidence builds and they order more tonnage.
However, this may take one to two years to deliver, so supply will lag demand then
overshoot as demand peaks.The result is considerable variations in charter rates and
thereby values of the shipping sector from year to year.We have considered these
factors and after discussions with industry players developed our view of future
market values.
MARINE COMMERCE
The value for the sector is based upon scaling up from known figures for London, the
largest market. Shipping activity remains the key driver; therefore, demand will grow
in line with the shipping sector forecast.
PORTS
We have valued the ports business by taking revenue and traffic figures for the world’s
leading ports and scaling up. (This value was then compared to other companies’
published estimates.) We then applied estimates for growth in seaborne trade used in
the shipping section to develop forecasts for future ports business.
CRUISE
Annual expenditure for the US, the largest market, is published by the International
Council of Cruise Lines.We have taken this and scaled up to give a view on world
market value. Recently European data on embarkations growth and forecasts has
been published by the European Cruise Council. Using these two main sources and
trends in marine tourism has enabled us to develop a view on annual growth rates
in future years.
MARINE TOURISM
In general the tourism sector, including marine tourism, has grown significantly in
recent decades and is now a major global industry.
By making assumptions on the proportion of domestic to international tourism in
each region, a total tourism value for the world can be estimated. Generally,
developing areas are thought to display the reverse situation of the likes of the US or
13
World Tourism Organisation, ‘Tourism Highlights’ Edition 2004.
MARINE INDUSTRIES GLOBAL MARKET ANALYSIS
UK, whose populations engage in high levels of international tourism. By applying
the proportions, by region, to the known data on international tourism receipts a
figure of total tourism can be derived.13
To derive ‘Marine Tourism’, a percentage of each world region’s total tourism was
estimated.This gives the world marine tourism market in 2004 as €155 billion, 11%
of all tourism.This percentage varies widely between regions.
(Another way of calculating the value of world marine tourism could be to apply a
multiplier to the Leisure Boating Industry Revenues to estimate ‘Marine Tourism’ but
this approach was not found to be viable.)14
OCEAN SURVEY
The market valuations and forecasts are taken from our published study, ‘The World
Ocean Survey Report’.The approach used in the study is a ‘bottom-up’ one – from
data on proposed activities (such as an offshore field development) we generate our
own individual activity forecasts, which, with typical survey task prices, are the inputs
to the models that value the individual markets.These are in two main groups, the oil
& gas markets and the non-oil markets.
SUBMARINE TELECOMS
Our historic data has been taken from ‘The World Ocean Survey Report’ and is
based on various studies we have carried out in the sector and information sourced
from telecom sector specialist KMI. Our forward view is also based on our
projection of their short-term global forecasts of total km to which we have applied
a regional segmentation based on the location of past installations and changes in
regional demand.
FISHING
The global fishing industry is in decline. Our five-year forecasts assume the value
of the catch will stay constant from 2002 onwards.This assumption has been made
on the basis of increasing production of fish (including shellfish) from aquaculture
compensating for the declining production of capture fishing and keeping prices
steady. Production is forecast to decline at the same rate as it has since 1994
(0.99% per year).
Marine fishing production can be viewed by tonnage and by value.The values are
derived from tonnage data in the Eurostat online database and further broken down
14
Ireland is the only country where there is available data on which to make this comparison.The boating industry is of varying
importance to tourism in general (Ireland: 12%, UK: 2%, US: 5%).This is probably due to the leisure boat industries in different
countries varying considerably in structure and overall size. For example, new boat sales make up different proportions of the leisure
boating industry (Ireland: 14%, UK: 19% & USA: 35%).There are also likely to be big differences between regions, especially
comparing the developed and developing world. For these reasons, this approach was not used.
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MARINE INDUSTRIES GLOBAL MARKET ANALYSIS
into molluscs & crustaceans (shellfish) and demersal & pelagic (finfish).This is our
best estimate, although the Eurostat/FIGIS/FAO information only contains data on
‘miscellaneous’ demersal and pelagic fish tonnage, not representing all fish caught.
Therefore, we have assigned ratios of demersal/pelagic (of total catch) based on
available data and applied those ratios to the total fish tonnage data (which is
complete). Eurostat/FIGIS/FAO data on shellfish tonnage appears to be complete and
these areas should be valued more accurately than for fish.
The value of each of these subsets was estimated by assigning an average price per
tonne, using the FAO ‘World Fishery Production: estimated value by group of species’
table, containing annual data from 1999–2002. If anything, this approach is likely to
estimate the world value of marine capture fisheries conservatively. For available years,
BIM data is used for Ireland, and DEFRA data for the UK, rather than our own
estimates.
MARINE AQUACULTURE
Between 1996 and 2002 tonnage growth was 9% p.a. and $ value growth 4% p.a.
Continuing strong future growth in demand is forecast. Forecast data from 2003/4
onwards assumes a continuation of growth rate in the volume of marine aquaculture
produced at 4% per year, based on FAO tonnage and value data.
SEAWEED
The historic value of seaweed production value is based on the Eurostat Aquaculture
and Capture fisheries databases data, based on live weight, 1994 to 2002. Our analysis
shows a value growth trend of 3% forecast growth per annum and we use this as our
future annual growth rate.
FISH/SEAFOOD PROCESSING
There is a generally a lack of information available on this subject, in any useful
format for the purposes of the report.Therefore, seafood processing revenues have
been estimated as being equivalent to the combined marine aquaculture and
fishing product value for each country.This view is based on data from a number
of countries including Canada, Ireland and the UK.This ‘combined value
approach’ correlates well with the limited data found on the value of countries’
processing industries.
MARINE INDUSTRIES GLOBAL MARKET ANALYSIS
Therefore, the forecast is based on the trends already defined by the fishing and
aquaculture sectors (i.e. the availability of the raw product). It could be argued that
there is a move towards more processing, with more value being added to the same
amount of raw product. Although, for the purposes of the report, we have maintained
the trends estimated for fishing and aquaculture production.
OFFSHORE OIL & GAS
Both historic and forecast data is based on ‘The World Offshore Oil & Gas Forecast
2005–2015’ published by Douglas-Westwood which draws from the ‘Energyfiles’
system an information service which records activity for each country worldwide.
The forecast methodology does not restrict itself to oil & gas production profiles
and direct capital costs for existing fields and specific new projects, as this tends to
understate total industry activity and spend. Forecasts are based on estimating yearly
production additions on a country by country basis, whereby all elements of
geological potential, capital and operating expenditures are taken into account.Thus,
items such as exploratory activity, front end engineering, unscheduled maintenance
work and unpredicted early production systems on new discoveries, together with
hidden costs such as signature bonuses and other overheads are implicitly included
in cost estimates.
MARINE RENEWABLE ENERGY
Douglas-Westwood operates the ‘World Offshore Wind Database’, and ‘World Wave
& Tidal Database’, extensive project databases with up to 60 fields of data on each
wind, wave and tidal project in operation and planning worldwide.These data sources
have been in place for four years and are constantly updated giving a current view
of industry activity. By only using this data which only relates to identified projects,
the subsequent market forecasts are grounded in reality.
The modelling process uses the Douglas-Westwood ‘slip method’ which considers
each renewable energy project on an individual basis, assessing its viability in light
of market forces such as government policy, financing, availability of contractors, etc.
All projects are allocated a ‘slip’ date which is our view as to when they will come
into production.This new date forms the basis of the forecasts of when future
expenditure and installations will occur.The $ values used in forecasting are based
on actual project costs.
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MARINE INDUSTRIES GLOBAL MARKET ANALYSIS
MINERALS & AGGREGATES
Past individual reports for the tonnage of aggregates extracted have been scaled up
and a world value estimated. Forecasts are based on taking a view based on historic
growth of aggregates demand.
SHIPBUILDING
The Lloyds Fairplay database was used to determine historic ship deliveries and vessel
presently on order together with their GT & CGT.This was then compared with
results from the Douglas-Westwood study, ‘The World Marine Propulsion Report’,
whose forecast methodology is based on the strong linkage between shipbuilding,
GDP growth and world seaborne trade tonnage.
In light of the high recent growth in shipbuilding activity, numbers were also
updated using OECD figures for 2003 (tonnages and $/CGT) and also the WES
European figures.
MARINE EQUIPMENT
Marine equipment is a very large market and in this report we define it as being
comprised of two main customer groups: the shipbuilding and oil & gas sectors.There
is growing technology content in both sectors, with hundreds of high-tech subsectors ranging from software to underwater connectors to control systems.
We value the world market for marine equipment in the shipbuilding sector in 2004
at €21.3 billion. For the oil & gas sector the capital expenditure component was used,
which we value at €49.7 billion in 2004.The overall forecast is, therefore, a function
of both the shipbuilding and oil & gas sector forecasts outlined above.
MARINE IT
The very wide range of applications and lack of any official information on the
value of IT deployed in the marine sector means that it is difficult to value the
overall market. In order attempt this, we have assumed that the IT content of
capital expenditure in three key areas of shipping operations (including IT additions
to existing ships), newbuild ship capex, and the offshore oil & gas industry
averages 0.5%.
The continual need to improve efficiency of operations in all sectors of the marine
industries will drive an increasing use of marine IT.Therefore, we assume that this
content grew to 0.75% by 2004 and thereafter remains at this proportion.
MARINE INDUSTRIES GLOBAL MARKET ANALYSIS
MARINE BIOTECHNOLOGY
The UK Foresight Report gives a predicted growth rate “exceeding 10% per annum
over the next three years” (from 2002). BCC Research in 2003 estimated average
growth from 1999 to 2007 as: USA 4.7%, the rest of the world at 6.4% and the total
global growth as 5.9%.
Over-estimation of market growth in the early years of technological development is
a common failing, therefore in our forecasts we have chosen to use an average growth
of 3.8%. In our view it is likely that the anticipated very large market for marine
biotechnology will develop outside the time period of this report. (This makes
marine biotechnology a very interesting long-term ‘investment’ prospect.)
EDUCATION & TRAINING
Education & Training has three primary activities: seafarer training, offshore worker
training and higher education.
We have estimated the market for seafarer training and offshore worker training by
taking published data on throughputs of training establishments, manpower updates
and industry statements.The in the case of seafarers we considered the world fleet
size, manning levels and retirement rates, and developed forecasts based on growth in
vessel numbers taken from our shipbuilding forecast. A similar process has been
undertaken for offshore oil & gas workers with future growth based on the main
sector forecast.
Valuing the ‘market’ for higher education is a more difficult process; an example is
how to clearly separate the education element of universities’ activities from research
activities. At least 241 establishments worldwide offer marine-related courses and our
values are based on estimates of annual student intake and average fees.The forecast is
then based on growth at 3% per annum.
RESEARCH & DEVELOPMENT
R&D occurs to a lesser or greater extent in every marine sector.The three largest are:
• Oil and Gas – where we use the mid point between separate estimates by
Shell and McKinsey.
• Shipbuilding – where claims have been made of 10% of revenues. However, we use
a more cautious 5%.
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MARINE INDUSTRIES GLOBAL MARKET ANALYSIS
• Government (civil spend) – where the US NOAA’s National Ocean Service is
perhaps the world’s largest spender.
Taking into account other industries, our estimated total for 2004 is some
€10.2 billion.
We assume a continuing level of R&D intensity in future years (R&D as a % of
total sector sales value) which is then applied to our individual sector forecasts, such
as shipbuilding.
Figure 4.2: Shipbuilding Expressed in € and $
4.3 DEFINITIONS
Exchange Rates – The marine market is an international industry denominated
in US$. At times, expressing the value of sectors in euros presents a false picture
of markets (see Figure 4.1) and introduces significant statistical difficulty in
our analysis.
We use actual historic exchange rates throughout this report and December 2004
rates for forecasts.
Source: Douglas-Westwood Limited
Growth Rate – The average annual growth rate is the sum of each of the five years’
annual percentage growth, divided by five (sum of 2004 to 2005… 2008 to 2009
divided by 5). However, the period growth (2005–2009) does not include the change
between 2004 and 2005. For example, in the case of Shipping this is significant as a
decline occurred between 2004 and 2005 (from €343bn to €288bn), but this decline
is not included in the period 2005–2009 (when growth is forecast from €288bn in
2005 to €308bn in 2009). During periods of considerable change, the overall effect
can be differences in the ‘annual’ and ‘period’ growth rates, sometimes from positive to
negative trends and vice versa.
Data – As other researchers have noted, more than half of the maritime sectors
identified are not covered by official European statistics and the situation becomes
worse when data is required for other countries and world markets.When data is
available, it is often in units (such as tonnage) and not € values. Internationally
comparable official statistics are often out of date, with data available in early 2005
often relating to 2002.This presents a particular problem due to the considerable
increase in activity in many marine sectors during these years.
In addition, statistics are often based on voluntary contributions and therefore often
incomplete. Examples include the leisure boating industry.
MARINE INDUSTRIES GLOBAL MARKET ANALYSIS
Marine Tourism – This is a sector that is particularly lacking in comparable
international statistics.
Secrecy – This is another factor that contributes to a lack of data on national and
global market values.The shipping industry operates in a global market and vessels are
registered in locations that present their owners with lowest costs of compliance with
regulations. In addition, a number of companies in the ship owning, shipping and
ports sectors are privately owned and structured to assure privacy and do not issue
annual reports giving values of sales and profits.
Sectors – Definitions of marine sectors differ from country to country (or are not
stated), so that information relating to one country is often not directly comparable to
that from others.
Models – In a number of instances (shipping, offshore oil & gas and renewable
energy are examples) we use our own detailed models of historic and future global
activity. In others such as marine tourism we generate estimates.
Values – In some instances, such as the marine fisheries sectors, shipbuilding, etc., we
use the value of production, in others the capital and operational expenditure. In
general, we are considering ‘markets’ and not the economic benefit to the country,
which is often a multiple of the stated market.
Double Counting – It is important to note that sector values cannot always be added
as, in many instances, this would cause double counting. In Figure 3.1 we try to avoid
some major examples of this.
Industry Structures – Individual countries may apply different structures and
definitions of the marine industries.
Sources/Forecasts – In general, forecasts are generated by Douglas-Westwood and
historical data from various sources which are referenced in the text.
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MARINE INDUSTRIES GLOBAL MARKET ANALYSIS
MARINE INDUSTRIES GLOBAL MARKET ANALYSIS
5 Long-Term Factors
5.1 ECONOMIC AND POLITICAL CHANGE
Economic stability and growth is particularly relevant when considering the
continuing reaction to the ‘war on terrorism’.The US response to 9/11 may have
marked the start of a new type of low-intensity war with occasional flare-ups in
different parts of the world.
Regional wars and prolonged domestic or ethnic violence create some of the most
pronounced shocks to the world economy, due to the substantial costs faced by the
countries or regions involved. Increasingly, disputes may involve using the control of a
vital commodity, such as oil.
Accordingly, security of energy supply is also an issue. Most of the world’s oil reserves
are located in countries with the potential for serious political upheaval in the
coming years.
In the world today there is a heightened degree of interdependence between countries,
which means disruption in one part of the world could have a knock-on effect in
unforeseen locations. As well as ties spanning long distances, such as the UK/US
relationship, closer to home the EU community has recently expanded considerably.
EU ENLARGEMENT
In 2004 ten more countries joined the EU, taking the total number of member states
from 15 to 25.This enlargement has brought trade and investment opportunities and
increases the EU population by 20%.This larger internal market means that firms can
expand production and take advantage of economies of scale.The additional members
will increase the EU’s authority and influence in international trade talks.The
potential for existing members to expand into new markets is also great.
Although to a great extent enlargement took place in the 1990s, with European
agreements liberalising trade.The EU’s export trade has risen 73% since 1995 and
imports by 81%.
Alongside the increased number of member states, other EU measures are likely to
affect the marine sector. One of the most significant is likely to be European
maritime transport policy:
• Revision of Community State Aid guidelines – stricter monitoring of state aid and
strengthening of the flag-link to continue the benefit from tonnage tax.
• Liberalisation of port services.
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MARINE INDUSTRIES GLOBAL MARKET ANALYSIS
• Short sea shipping – in 2001 this provided 40% of EU tonne-km and the
‘Motorways of the Sea’ programme will build on this.
• ‘Marco Polo’ programme – a second programme is being established from 2007 to
shift international road freight to water and rail.
• Competition rules – adoption of a white paper to introduce more competition into
the sector.
• Safety – (following the sinking of the ‘Prestige’) the accelerated phasing out of
single hull tankers.
• Establishment of the European Maritime Safety Agency and the Future Maritime
Safety Package.
• Maritime security – enhancing ship and port security.
• Human issues – directive on the Minimum Standard of Training for Seafarers.
Consolidation of all existing maritime labour standards.
SECURITY
The continuing effects of 9/11 have increased concerns over maritime security.
Maritime transport is vulnerable to terrorist attack.The cruise ship sector has
benefited as a result of a reluctance of some to holiday using air travel.
Many initiatives and legislation have already been adopted by individual countries and
also internationally, most recently with the introduction of the ISPS Code
(International Ship and Port Facility Security Code). Such legislation will lead to
fundamental changes in the maritime industry.The Code stipulates a number of new
regulations that require additional resources, the costs of which will fall to those
whom the measures are designed to protect. Also, some believe that the Code relies
on seafarers for security and the additional workload is making it more difficult to
recruit and retain them.
LOCAL CONTENT
This is becoming an issue of growing importance in a number of sectors. Many
countries demand a certain level of local content in any contracts awarded to foreign
companies. For operations in developed countries this is not a great problem as work
can be sub-contracted to local companies. However, developing countries present a
challenge as they do not often have the established industrial infrastructure to act as
sub-contractors.
MARINE INDUSTRIES GLOBAL MARKET ANALYSIS
Achieving local content is becoming a significant problem in the case of large hightech capital projects such as those undertaken for the offshore oil & gas industry.
5.2 GLOBALISATION & SEABORNE TRADE
The world market is a growing one, stimulated by increasing consumer demand and
the globalisation of production. Low-cost manufacturing areas continue to increase in
importance and are increasingly involved in globalised activity.The export of
manufactured goods from developing countries doubled between 1981 and 2000. As
the western world still accounts for two-thirds of the world’s manufactured imports,
industrial growth in the developing economies is still dependent on the markets in
the developed world.
In the marine sector a major impact of this in the past three decades has been the rise
of South East Asia as the world’s leading shipbuilding region. However, the market
positions of Japan and South Korea are increasingly likely to be threatened by China
with its lower costs. China is integrating into the global economy rapidly, since
becoming a member of the WTO at the end of 2001.
China’s demand for raw materials and energy to feed its domestic and export
industries has recently grown exponentially.Whilst European oil consumption has
remained relatively constant over the past decade, China’s has doubled. In 2004
Chinese steel imports declined but exports doubled – by 2006 China is forecast to be
producing 30% of the world’s steel.
Since an estimated 90% of world trade is carried by sea, this helps boost the demand
for shipping services.
Developments in China are now considered to be one of the most important stimuli
to growth for the tanker, chemical, bulk and container trades. Order books for
newbuilds are at record levels and if world trade continues to grow at expected rates,
then this extra capacity will eventually be absorbed without any significant long-term
fall in capacity utilisation.
However, there is likely to be a dampening of the currently rising rates for vessels, at
least in the short term.The volume of international seaborne trade increased in 2003
by 4.4%, compared with the previous year, to 5,840 million tonnes and tonne-miles
by 5.9%. In line with such increases in international trade, ports have recently shown
an increase in throughput, especially in container volumes.
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MARINE INDUSTRIES GLOBAL MARKET ANALYSIS
A further example of globalisation is in engineering design; offshore industry
contracting and some technology companies (particularly in software) are also
increasingly establishing operations in India and Eastern Europe.
5.3 DEMOGRAPHIC CHANGE
The world’s population is ageing, with unprecedented growth in the proportion of
the population over the age of 60.This is a result of the demographic transition from
high to low fertility and mortality rates.This situation has profound effects on all
facets of human life. In the economic area, population ageing will have an impact on
economic growth, savings, investment and consumption, labour markets, pensions,
taxation and intergenerational transfers. Developing countries have not achieved such
advanced levels of transition so their populations continue to grow.
In 2000 the world population was 6.1 billion and growing at 1.4% annually,
representing an increase in population of 85 million people per year. Almost all of this
growth is concentrated in Asia, Latin America and Africa.
Size matters. China has 21% of the world population (is a multiple of that of Japan)
and this size is already manifesting itself strongly in terms of soaring consumption
and exports.
The decline of engineering students is a particular problem in the West. In emerging
markets such as India and China about 40% of students take engineering degrees
compared with the US at 4%.15
5.4 LOW-COST MANUFACTURING
One impact of changing global demographics is a transfer of manufacturing to countries
with low-cost skilled workforces of which China and India are prime examples. Over
the decade to 2000, the fastest growing exports were ‘high technology goods’
(electronics, etc) with annual average growth in US$ terms of 12.3%.16 (By comparison,
low technology ‘resource-based’ manufacturing grew at an average of 7.6%.)
The fundamental reason for developing countries’ growth is low costs. Electronics
company Samsung pays workers in the UK £5.61 (€8) an hour, in Slovakia £1
(€1.4) and in China £0.5 (€0.7).
Another factor is low labour productivity due to shorter working hours in some
Eurozone countries compared to countries such as the US. In 1970 the annual
number of working hours per capita in the US and the Eurozone countries was
15
Bill Gates addressing the World Economic Forum. Financial Times, p1, 31 Jan 05
16
UNIDO database
MARINE INDUSTRIES GLOBAL MARKET ANALYSIS
about 800. It is now about 950 in the US but less than 700 in the Eurozone.17 In the
period 2000–4 the Eurozone achieved annual productivity increases of 0.5–1.0%, the
US, 3.8–4.0%.18
5.5 ENVIRONMENTAL ISSUES
Responses to the effects of climate change include a considerable increase in support
for renewable energy and the impact of environmental policies on sub-sectors ranging
from marine propulsion to offshore engineering projects.
The United Nations Framework Convention on Climate Change was adopted in
1992. In 1997 developed countries, including Ireland, signed the Kyoto Protocol
making a commitment to reducing global emissions legally binding. By 2001 Ireland
had not made any progress towards limiting its emissions, unlike countries such as
Germany and the UK.The effects of climate change, if emissions go unchecked, are
increases in sea temperature, storm intensity, wave height and sea level as well as
possible changes in sea currents, with profound long term implications for marine life.
In addition to the need to cut emissions, increased demand for energy and a possible
decline in oil supply over the next few years could increase the need for, and
commerciality of, renewable energy. Renewable energy is already the fastest growing
sector of the energy industry. Many suggest that governments need to get more
involved with policies to promote the sector, but others feel it should be left to
market forces.The growing importance of climate change, related environmental
monitoring and of aquatic resources as food and of water sources will also impact on
a growing demand for monitoring technologies.
5.6
ENERGY SUPPLY & DEMAND
OIL & GAS
Global energy consumption has more than doubled over the past four decades, mostly
being driven by the developing economies. Hydrocarbons (oil & natural gas) are
currently the world’s most important energy source providing some 62% of global
energy demand.19 In 2004, oil demand was some 80 million barrels per day (b/d) but
the IEA forecasts this demand will grow to 118 million b/d by 2025.
Many individuals and most governments assume oil supplies are virtually unlimited.
However, there are other views.Three fundamentals are now strongly evident:
increasing oil demand, reducing reserves and a decline in discovery rates.
17
Paul de Grave, professor of international economics University of Leuven. Financial Times 5 Aug 2004.
18
Financial Times, p3, 16 Jan 2004.
19
‘BP Statistical Review of World Energy 2004’.
45
46
MARINE INDUSTRIES GLOBAL MARKET ANALYSIS
For the past 30 years oil prices have been subject to massive fluctuations as a result of
political actions ranging from local civil disturbance to outright wars in the Middle
East.The results were the tripling of oil prices in 1973 and again in 1979.The
reaction of the oil consuming western economies has been to seek oil supplies from
other less troubled areas, resulting in the development of whole new oil production
provinces such as the North Sea. Although oil demand has continued to grow, from
some 58 million barrels per day (bpd) in 1973 to some 80 million bpd in 2004, the
proportion shipped from the Middle East has fallen as the OPEC countries lost
market share to these new non-OPEC suppliers.
Since 1973, European oil demand has grown by only 6%, the US by 16%, whilst in
the developing economies growth has been 202%.
But the picture is changing. In the North Sea and some other shallow-water offshore
areas oil & gas production has passed its peak and will soon be entering a period of
terminal decline. Coupled with other factors, the effects of supply restrictions are now
evident in prices that exceeded $53 in late 2004.
In theory, the reserves that are still available worldwide are considerable – 40 years at
current demand is much quoted, but is this true? Such figures do not take into
account the problems (both technical and political) in accessing the reserves.There is
no doubt that OPEC fully realises the economic problems that high oil prices cause
its customer countries which, at their most serious, would again reduce demand.
Figure 5.1: Oil & Gas Supply Forecasts
Conventional non-OPEC oil supplies are being used up at an alarming rate and at
present OPEC countries are unable to provide much more. Politics permitting, in the
short term oil prices could moderate. But longer term, the situation for oil consumers
– in other words all of us – is not looking good.
NATURAL GAS AND LNG
Growth in demand for natural gas is outstripping that of oil. Gas reserves are
considerable, possibly amounting to at least 20 years more than oil.
However, these major reserves are far removed from markets and depletion of reserves
in countries such as the UK and the US means that activity is focused on longdistance subsea pipelines.
Source:
“The World Oil Supply Report”
Douglas-Westwood Limited
Despite this, much gas is economically stranded and at present liquefaction offers the
only real solution. Investment in liquid natural gas (LNG) plants, LNG tankers and
MARINE INDUSTRIES GLOBAL MARKET ANALYSIS
47
offshore import terminals is set to boom. Analysis indicates a 40% growth in spend,
which over the next few years will start to exceed $10 billion per annum.20 However,
in the longer term the demand for LNG is set to grow much more.
Another factor that could boost the use of gas is a growth in its conversion to liquid
fuels – gas to liquids. GTL, regarded as a high cost process, has been made increasingly
viable by high oil prices and the abundance of gas supplies, resulting in major
investments in the Middle East.
OIL PRICES TO INCREASE
Growing world oil demand and reducing non-OPEC production means more tanker
movements from the Middle East and West Africa, particularly to the developing
countries. As OPEC’s share grows it will increasingly be in a position to more
effectively control global supply and a sustained rise in oil prices will therefore occur.
The balancing act between getting top dollar for its oil and damaging customer
economies by prices that are too high will be difficult to get right and requires
OPEC members to bring on-stream much more capacity to satisfy demand – the big
question is can they do this?
It is generally accepted that the major OPEC economies need $30 per barrel oil to
balance their economies, a figure inflated by recent falls in the value of the US dollar.
In short, it is very unlikely that from now on we will see a sustained period with
prices much below this $30 threshold.
Figure 5.2: Global Oil Supply to Peak?
PEAK OIL
As we look ahead the situation of increasing demand and reducing production
capacity raises fundamental concerns.
Analysis for ‘The World Oil Supply Report’ shows that it is increasingly likely that oil
supplies will peak, possibly within a decade. In short, the world is likely to run out of
(cheap) oil. It is becoming increasingly recognised that the situation is not if this will
happen but when and how the energy supply industry will react.
The fundamental conclusions remain that the world’s known and estimated yet-tofind oil reserves and resources cannot satisfy even the present level of production
beyond 2020. Just 1% growth in demand is such that a production peak occurs as
early as 2016 at some 85 million barrels per day. Increased demand gives a higher
peak but earlier.
20
‘The World LNG & GTL Supply Report’, Douglas-Westwood Limited
Source:
“The World Oil Supply Report”
Douglas-Westwood Limited
48
MARINE INDUSTRIES GLOBAL MARKET ANALYSIS
Although the response will be complex, this will ultimately result in a sustained major
increase in oil prices and a huge demand for other energy sources.
Figure 5.3: Oil Prices 1996–2004
OTHER ENERGY SOURCES
As discussed earlier, we expect a strong growth in demand for natural gas, particularly
LNG. Some power generation capacity will have to switch back to environmentally
unfashionable coal, possibly sourced from countries such as Australia leading to
increased demand for coal carriers. However, ultimately it is likely that nuclear power
will have to be resurrected.
For Europe, marine renewable energy has prospects for strong growth, particularly
offshore windpower, as onshore sites are used up. Analysis of prospects in the
‘The World Offshore Wind Database’ suggests a capital spend of nearly $10 billion over
the next five years.The immediate growth market is the UK where we forecast 499
turbines will be installed offshore followed later by Germany with 558. Ireland, with
its excellent coastal wind regime has prospects for power generation far above its own
needs and consequently for exports to the UK.
Source: futures.tradingcharts.com
Wave and tidal power is an embryonic industry but with good long-term prospects.
‘The World Wave and Tidal Database’ is forecasting the cost of annual installation to
reach $150 million by 2006. Here the UK is the market leader, but again Ireland has
excellent potential.
ENERGY – A LONG TERM VIEW
Increasing Energy Prices – There is growing support for the view that oil prices
could increase considerably in the early years of the next decade. Unmanaged, this
could have a significant impact on global GDP and world trade.
Energy Carriers – High oil demand mainly emanating from China has resulted in a
surge of orders for tankers.This new capacity will take some time to be fully absorbed
by the market and may result in some medium-term oversupply. However, we then
expect long-term growth trend to resume.The problem will then become the limits
of oil supplies which we believe could occur around 2015.This is likely to reinforce
the present strong growth in demand for LNG carriers, increase development of
demand for liquid petroleum gas (LPG) carriers and drive a long-term growth in the
coal freighters market.
MARINE INDUSTRIES GLOBAL MARKET ANALYSIS
Renewable Energy – This is regarded as a high cost option. However, in light of
rising oil, gas and coal prices, past comparisons of the costs of generating energy from
renewable sources are probably in the main based on input energy costs for electricity
generation now some 50% below present levels.
In the long-term, fossil-fuel generation costs can only increase and a likely effect is
that the present emphasis on developing renewable energy for environmental reasons
will be overtaken by a drive to ensure security of supplies.
Investment in renewable energy should be a key factor in national strategy. In light of
future shortfalls, investment in energy is a win-win situation.
49
50
MARINE INDUSTRIES GLOBAL MARKET ANALYSIS
MARINE INDUSTRIES GLOBAL MARKET ANALYSIS
6 Shipping & Transport
51
Irish Market €M
UK Market €M
Europe Market €M
Definition – expenditure on all shipping activities.The UNCTAD estimate based on a
percentage of the value of total world seaborne trade is referenced by shipowner organisations.
6.1 INTRODUCTION
There are more than 50,000 merchant ships trading internationally.The world fleet is
registered in over 150 nations, and manned by over a million seafarers of virtually
every nationality.21
World Market €M
1999–03
2004
2005–09
5,612
1,000
9,460
61,161
20,442
86,201
452,186 151,137
637,315
1,011,600 342,743
1,436,684
Figure 6.1: Tonne-miles & Charter Rates
The main driver of the shipping industry is the tonnage of seaborne trade (import &
export), the volume and geographic distribution of which changes as a function of
nations’ GDP. Seaborne transport is estimated to be responsible for up to 90% of
world trade and in the case of some countries such as Brazil and Peru, 95%.
The volume of trade impacts on availability of vessels and hence vessel charter rates.
In effect, a relatively small increase in demand can result in a large increase in
shipping rates (and vice versa).The result is considerable variations in the values of
the shipping sector from year to year.
Over the last four decades seaborne trade has nearly quadrupled and as shown in
figure 6.1 the volume of shipping business continues to rise.The OECD estimates
a world trade growth at 7.8% for 2004 and 9.1% for 2005.
The ClarkSea index in 2004 shows rates averaging $28,000 – compared with previous
ten-year average of $13,800.The chart above also shows the increasing instability of rates.
Source: Fernleys &Clarksons
Figure 6.2: Shipping – World Market
In the container sector, trade growth is forecast at 10.5% in 2005, slowing slightly to
9.7% in 2006. However, on the supply side, the container vessel fleet is expected to
increase by 9.8% in 2005, 12.6% in 2006 and 8.8% in 2007. So overall, a ‘soft landing’
is projected for container shipping rates.22
6.2 WORLD SHIPPING MARKET
We estimate merchant shipping was a €243 billion industry in 2003. A rise in world
trade of 16% mainly driven by the Chinese economic boom has driven up shipping
rates and means the market is likely to have grown to €343bn in 2004 – the best year
for 30 years. Although seaborne trade will continue to increase, we forecast falling
freight rates as more shipping capacity enters the market resulting in an average of
€287bn from 2005–09.
Shipping has traditionally been a boom-bust industry where any major upturn is
eventually undermined by over-investment in new vessels. Drewry Shipping has stated
that the 14% increase in shipping capacity in 2006 is likely to outstrip demand in that
year.The Korea Research Institute expects tanker supply to outstrip demand in 2005.
21
http://www.marisec.org/shippingfacts/keyfacts.htm
22
Clarkson’s reported in Lloyd’s List, p4 2 Jan 05
Source: Douglas–Westwood
52
MARINE INDUSTRIES GLOBAL MARKET ANALYSIS
Table 6.1: Shipping – World Market
1999–03
Africa
Asia
Australasia
7,861
2004 2005–09
2,693
11,233
401,104 137,383 573,153
6,391
2,189
9,132
E Europe/FSU
22,625
7,749
32,330
Latin America
14,911
5,107
21,308
Middle East
36,610
12,539
52,313
North America
69,912
23,946
99,901
Western Europe
TOTAL (€M)
452,186 151,137 637,315
1011,600 342,743 1436,684
Our own view is of a gradual slowing of shipping sector growth and a return to more
normal long-term trends by 2007.
It is difficult to quantify the value of the volume of world seaborne trade in monetary
terms, as figures for trade estimates are traditionally in terms of tonnes or tonne-miles,
and are therefore not comparable with monetary-based statistics for the value of the
world economy.
However, the United Nations Conference on Trade and Development (UNCTAD)
estimates that the operation of merchant ships contributes about US$380 billion
(€292bn) in freight rates within the global economy, equivalent to about 5% of total
world trade.23
Source: Douglas-Westwood
Figure 6.3: Shipping – Regional Segmentation
2005–2009
In order to check the above we have analysed earnings of some major ship owners.
As an example, Danish shipping has earnings of €15bn of which some $5.3bn comes
from its own ships. Danish ships form about 2% of the merchant fleet by gross
tonnage. If other owners have similar earnings then total world earnings of €243bn
are suggested and this is the figure we use.
There is no simple way of precisely apportioning earnings from shipping to regions
and countries.The complication is that a ship may be operating under the flag of
country A, owned by a company in country B, chartered by a company in country C
and trading between countries D and E.The result is that parts of the associated
business will accrue to A, B, C, D and E.
Source: Douglas–Westwood
Figure 6.4: Shipping Rates 2001–04
6.3 CHINA & THE WORLD MARKET
In 2004, rates for many types of shipping were double the averages achieved during
the 1999–2003 period and in October spot rates for some very large crude carriers
(VLCC) reached five times the long-term average.
Shipowners have responded and the waiting time for new vessel deliveries reached
three years.
Chinese economic growth is the main reason for the remarkable increase in shipping
rates and industry profit. In 2003, China’s imports expanded by 40% in nominal dollar
terms while its exports grew by 35%.
China is in the process of becoming the leading global manufacturing base – ‘the
workshop of the world’ (a position once claimed by the UK). Much is driven by low
wage rates, often 90% below European levels. Since the late 1970s it has managed to
Source: Danish Shipping Association/R.S. Platou
23
‘shipping Facts’ http://www.marisec.org/shippingfacts/worldtradevolume.htm
MARINE INDUSTRIES GLOBAL MARKET ANALYSIS
double its GDP every ten years and this is likely to continue for the foreseeable
future. However, the recent economic boom could return to its long-term trend with
8% forecast in 2005 compared with an estimated 9.3% in 2004.25 (It should be noted
that unofficial estimates have put China’s GDP growth at 11% in 2004.)
53
Figure 6.5: Danish Shipowners Earnings 2003
The growth rate of capital asset investment is expected to be 27% in 2004, (a drop of
15% from the first quarter) and 24% in 2005.The Chinese government has stated that
cooling the economy will be a priority in 2005 and rising interest rates and
government-imposed lending curbs are reported to be initiated.
Economic activity has exceeded long-term rates as large amounts are imported to
both feed manufacturing and infrastructure developments.The overall result is an
unprecedented increase in two-way traffic – import of bulk commodities and export
of containers of manufactured goods.
Further Chinese growth is also likely as the European global quota system on textiles
and clothing is lifted. Ultimately there must be a limit as high growth rates become
harder to maintain. For example, China already has 80% share of US imports of toys
and footwear.
6.4 EUROPEAN MARKET
Within Europe the market was estimated to be worth €151 billion in 2004.The
European Union is very dependant on maritime transport. Official statistics state that
70% of external trade (the European Community Shipowners Association say 90%)
and 20% of internal trade in terms of volume is made by sea. A large part of the
increase over the years can be attributed to the import of oil and oil-based products.
Shipping divides into two areas; deep-sea transport – shipping on long sea routes, and
short-sea shipping – between national or European ports.
It has been stated that there were 14,000 enterprises active in the EU in 2001
generating €13.4 billion of added value and employing 155,000 persons. (Includes
both deep-sea and coastal transport.) The value added at 232% of personnel costs
compares with an average (for non-financial services) of 148%.
The sector is characterised by ‘flags of convenience’ or ‘open registries’ whereby
vessels controlled by owners in one country are registered in another that offers more
attractive terms for taxation and legislation.
24
‘Danish Shipping – Figures’ Danish Shipowners Association. 2004.
25
‘Survey by the China National Bureau of Statistics’ reported in China Daily, 20 December 2004.
Source: Danish Shipping – Figures24
54
MARINE INDUSTRIES GLOBAL MARKET ANALYSIS
Table 6.2: Top 25 Shipowners – Tonnage
Country
GT 1,000
GT%
1
Greece
90590
16.0%
2
Japan
76423
13.5%
3
Germany
36314
6.4%
4
Norway
35169
6.2%
5
USA
31396
5.5%
6
China
29884
5.3%
7
Hong Kong
17502
3.1%
8
South Korea
16665
2.9%
9
Taiwan
15291
2.7%
10
UK
14552
2.6%
11
Singapore
14165
2.5%
12
Denmark
12347
2.2%
13
Russia
10621
1.9%
14
Italy
10302
1.8%
15
Malaysia
7211
1.3%
16
India
7079
1.2%
17
Saudi
6655
1.2%
18
Switzerland
6527
1.2%
19
Turkey
5573
1.0%
20
Sweden
5402
1.0%
21
Iran
4958
0.9%
22
Canada
4407
0.8%
23
France
4281
0.8%
24
Netherlands
3969
0.7%
25
Philippines
3712
0.7%
ROW
GT
Total World
95411
16.8%
566406
100.0%
In an effort to counteract the impact of this 11 European countries have adopted a
favourable taxation programme based on tonnage operated rather than profits and this
‘tonnage tax’ has resulted in more owners registering ships with European countries.
Table 6.2, of the top-10 ship-owning countries shows the success of Germany which
has grown its controlled and registered DWT by 67% in four years to take third
place. By comparison Norway has failed to maintain a competitive position, falling to
fifth place.
The EEA (European Economic Area) registered fleet increased to about 28% of the
world fleet in 2003, a growth of 50% compared to the previous year. Clearly the fleets
of the new EU countries contributed to this but even without these there was
growth of almost 5%.26 However, arguably the more significant figure is that the EU
controlled fleet now represents 44% of the world merchant fleet.
Greece is the biggest shipping operator both in Europe and worldwide, but secrecy
regarding its shipping turnover is legendary. However, the Bank of Greece expects
turnover of €10.9bn for the first 10 months of 2004.We believe this figure grossly
undervalues Greek market share of 16% of world gross tonnage (as Denmark
generates the same turnover with 2.2%).
Greek shipowners control some 161 million DWT, a value that has increased at 4.6%
per annum since 2000.
Denmark, which has a supportive tax regime has seen its flagged tonnage grow by
40% over the last decade. Danish shipping revenues were €15bn in 2003.
Finland has few newbuilds registered under its flag, with the average age of the fleet
at nearly 20 years, almost entirely manned by Finnish seafarers due to a strong union
opposing foreign employees. Finland’s foreign trade shipments (import and exports)
were over 93 million tonnes in 2003.
France – the French fleet consists of 207 ships and has an average age of less than
eight years, representing 4.6 million GT and 6.2 million DWT.
Germany’s fleet in 2003 was expanding with 118 newbuilds, making it the fourth
largest in the world, with its largest component being its 919 container ships. ISL
report that German shipowners increased their controlled tonnage by an annual
average of 13.7% to control 51 million DWT, but only 7 million was attributable to
the German registered tonnage. At the end of 2004, German owners controlled 2,560
26
‘Current International Shipping Market Trends’ European Commission. OECD Workshop on Maritime Transport.
Paris, November 2004.
MARINE INDUSTRIES GLOBAL MARKET ANALYSIS
ships.The fleet has doubled since the introduction of the tax five years ago. (It is
reported that “in exchange for considerable subsidies” a further 110 vessels will be
brought into the German flagged fleet by end 2005).27
Ireland’s tax tonnage regime and low corporate tax rate has been of interest to
national and European shipowners and the country’s sector has shown good
development. Older tonnage is being replaced by newer secondhand ships,
47 vessels entered with the Irish Chamber in 2003 – an increase of 68% since
1999.The Irish Maritime Development Office (IMDO) estimate that since 2000
employment in international shipping has increased by an average annual rate of
5.6%.28 These increases are mainly attributed to the introduction of a tonnage tax
regime. A report commissioned by the Marine Institute estimates that shipping
and maritime transport was a €1.3bn sector in 2003.
Italy’s fleet numbers 1,407 vessels of which 676 are over 1,000 GT.There has been
a 4% increase in tonnage on 2002, but a 2% decrease in vessel numbers.There are a
large number of newbuilds within the fleet and growing registration in the Italian
International Register. 134 newbuilds were ordered during the 2000–2003 period.
In 2003 shipping (the transport of cargo and passengers) totalled €12.2 billion and
employed 26,800 people and the maritime sector as a whole produced €26.3 billion.
Netherlands – the Netherlands witnessed a slight decrease in the numbers of ships
registering in the country from the end of 2003 (786), compared to 2002 (810).The
first time since 1996 numbers have not increased, perhaps signalling that newbuilds
are being registered elsewhere or existing ships re-registered outside the country.The
shipping industry is worth €12.6 billion and employs 190,000.
Norway did not benefit from the steep rise in freight rates experienced internationally
in 2003.The fleet also shrank by 48 ships, a similar decrease to 2002, leaving 953.The
Norwegian Tonnage Tax System is not competitive with some EU countries, but there
are plans to align it with the EU and a commission was set up in late 2004.
Portugal’s fleet continues to decline, due to lack of development in the national
shipping policy, although a commission for a cruise ferry passenger liner was recently
awarded and three bulk carriers were purchased in 2003.
Spain had a more positive year, with the Spanish controlled merchant fleet increasing
8.3% in GT in 2003 with 40 newbuilds since 2000. Maritime trade increased by 1.4%
from 2002, to 290 million tonnes.
27
Lloyd’s List p3, 26 Jan 2005.
28
Duffy, C, Ireland – growing international shipping centre. Shipping Finance Annual 2004/5.
55
Table 6.3: Controlled & Registered Fleets
DWT (M)
2000
2004
Greece
135.1
161.4
19%
Japan
96.3
114.2
19%
Germany
30.9
51.5
67%
China
39.2
49.1
25%
Norway
54.1
43.8
–19%
US
44.5
40.6
–9%
Hong Kong
36.7
37.9
3%
Korea
35.5
26.2
–26%
Taiwan
19.9
23.7
19%
19
23.3
23%
501.3
571.7
14%
Singapore
Sub-total
Growth
other
257.2
283.2
10%
World Total
758.5
854.9
13%
Europe
341.2
375.2
10%
Asia & Oceania
309.9
362.6
17%
62.9
58.8
–7%
6
5.1
–15%
38.7
53.3
38%
America
Africa
Unknown
Source: ISL, ships =>1,000 dwt
56
MARINE INDUSTRIES GLOBAL MARKET ANALYSIS
Sweden – in 2003, Swedish shipping consisted of 571 ships totalling 10.8 million
DWT, a slight increase on 2002. 29 new vessels totalling 1.1 million DWT were
delivered to Swedish shipowners during 2003. During 2004 12 new vessels were to
be delivered.
UK – since January 2000, the UK-owned trading fleet has now more than doubled,
and the tonnage under the UK flag has increased by over 250%. During 2003 UK
shipowners purchased vessels (new and second hand) to the value of €898 million.29
At the end of 2003, the UK managed nearly 6% of the world’s DWT which suggests
a turnover of €14.6 billion. At the end of 2004, 71 companies operated 758 ships.
Table 6.4: Annual Average Growth Rate (%)
2000–05
05–10
10–15
15–22
Dry Bulk
3.0
2.8
1.7
1.5
Tanker
1.3
1.7
1.4
1.3
General Cargo 3.4
4.2
3.2
2.7
Container
5.3
4.3
3.8
5.7
6.5 THE LONG-TERM – 2010 ONWARDS
The strong growth of 2004 is unlikely to be sustained at such high levels. Limits are
being experienced in other parts of the transportation infrastructure – the Panama
Canal is operating at 93% of capacity.The increasing need for major infrastructure
investments may be a factor restraining growth – the Panama Canal needs $8bn of
investment.
Source: ISL/Global Insight World Trade Service
However, world seaborne trade is predicted to grow substantially over the long term.
Container traffic should experience the strongest growth as there is a continuing shift
to the use of containers for general cargo. From 576 million tonnes in 2004, (11% of
world seaborne trade) container traffic is expected to reach 1.3 billion tonnes (46%)
by 2022.30
Other forecasts say there will be another 2 billion tonnes of cargo by 2025.The
OECD region is now economically mature so it is growing quite slowly. As Asia
grows and China finds its feet the importance of the ring of economies around the
South China Sea will increase. India is on the road to deregulation and is growing
fast. Over the next twenty five years the ex-Soviet states may overcome their present
difficulties and become a more substantial economic force. Latin America is growing
steadily and with each decade will gain critical mass as a centre of trade.31
In the case of China, its exports will have doubled between 2000 and 2005. Its
container exports are forecast to grow from some 15 million TEU in 2004 to 40
million by 2020.
All such forecasts assume continued availability of cheap energy – a situation we
greatly doubt.
29
‘Transport Statistics Report 2003’. UK DoT, published Oct 2004.
30
Global Insight World Trade Service.
31
‘The Demand for Sea Transport 2000 to 2025’ Clarksons, 2004.
MARINE INDUSTRIES GLOBAL MARKET ANALYSIS
7 Marine Commerce
57
Irish Market €M
UK Market €M
Definition – the sector includes ship operations, brokering and insurance to specialist
publications. (We exclude shipping operations revenues which are covered under ‘shipping’.)
7.1 INTRODUCTION
Marine Commerce is our preferred term for marine services, a long-term growth
sector modulated by fluctuations in vessel charter rates. London is the world’s leading
centre, but its position is increasingly under threat from SE Asia (particularly
Singapore and increasingly Shanghai) due to the high cost of doing business in
Europe compared to SE Asia, together with the growth of that region as a major user
of shipping.
1999–03
2004
2005–09
209
55
217
5,636
1,477
5,846
Europe Market €M
10,437
2,736
10,826
World Market €M
26,092
6,840
28,670
Figure 7.1: Marine Commerce – World Market
We estimate that London and Western Europe together accounts for 38% of the
world market and Asia 24%.
Due to the complex nature of marine commerce operations, the figures given are
revenues rather than total sales which would be much greater.
Marine commerce is of major strategic importance as a successful centre tends to
cluster decision makers for many associated marine activities.
Source: Douglas–Westwood
Table 7.1: Marine Commerce – World Market
7.2 WORLD MARKET
The Marine Commerce sector was worth almost €7 billion in 2004. ‘Marine
Commerce’ is perhaps a better description than the often-used term ‘Marine
Services’, as the sector ranges from ship operations, brokering and insurance to
specialist publications.
This is a long-term growth sector, although the 2005–2009 average annual growth
rate is -1.8% due to a spike in activity in 2004. However, over the entire period sector
value is set to rise from €4.1 billion in 1999 to €6.1 billion in 2009. London is still
the world’s leading centre, but its position is increasingly under threat from SE Asia
(particularly Singapore). Marine commerce is of major strategic importance as a
successful centre tends to cluster decision makers for many associated activities.
7.3 EUROPEAN MARKET
The European Marine Commerce sector was worth €2.7 billion in 2004, this share
constituting 40% of the world.The large share is attributed to clusters of marine
financial activity. Usually clustered around a specific city, the marine commerce sector
is comprised of many activities. Detailed analysis of marine commerce clusters are
rare, figure 7.3, drawn from a recent report, depicts London’s activities.32 The London
model is not directly transposable onto marine commerce in other cities, but clearly
32
‘The Future of London’s Maritime Services Cluster’. 2004. Corporation of London.
1999–03
Africa
Asia
Australasia
2004 2005–09
522
137
573
5643
1505
6949
783
205
860
E Europe/FSU
1305
342
1433
Latin America
1044
274
1147
Middle East
1044
274
1147
North America
5315
1368
5734
Western Europe
10437
2736
10826
TOTAL (€M)
26092
6840
28670
Source: Douglas-Westwood
Figure 7.2: Marine Commerce – Regional
Segmentation 2005–2009
Source: Douglas–Westwood
58
MARINE INDUSTRIES GLOBAL MARKET ANALYSIS
Table 7.2: Companies in London’s Marine
Commerce Cluster
serves to depict the very wide range of participants. Of particular significance is the
interaction with the London financial services community.
Category
No.of Companies
Ship Agency & Forwarding
336
Shipowners, Operators & Managers
206
Marin Insurance
193
Shipbrokers
143
Maritime Organisations / Associations
105
Maritime Legal Services
101
Consultants & Surveyors
98
Ship Finance & Related Services
62
Charterers
42
ICT Services
35
P&I insurance
26
Maritime Education & Training
12
Marine Personnel
9
Classification Society
8
Media and Publishing
6
Total
1,382
One difference to other marine commerce clusters is the presence of major
international organisations such as IMO in London which serve to act as a point of
attraction for a wide range of other official bodies. Also of significance is the presence
of the Lloyd’s insurance market and the Baltic Exchange.
Net overseas earnings (2002) from marine commerce in the city are estimated at
£1.1bn (€1.7bn), to which earnings from overseas shipping adds a further £1.1bn,
giving a total of £2.2bn (€3.4bn). (In this report we treat shipping as a separate
activity.)
Total sales are considerably greater.The shipping sector for example, comprised of
owners, agencies, brokers & consultants’ stated sales of £9.4bn (€14.4bn).
In addition to the numbers in table 7.2, a further 375 companies have a trading office
in London.The report notes that it is difficult to determine how big or important the
London cluster is, but it is certainly the largest in the world. Significant marine
commerce clusters exist in the other major European shipping countries such as
Denmark, Germany, the Netherlands and Norway.
Figure 7.3: Marine Commerce Cluster (London)
MARINE INDUSTRIES GLOBAL MARKET ANALYSIS
7.4 THE LONG-TERM – 2010 ONWARDS
The supply of marine commercial services is a fundamental need of the world’s
shipping, shipbuilding and, to a lesser extent, most other marine sectors. Shipping
activity remains the key driver, therefore demand will grow in line with the
shipping sector.
The main potential for change is in the centres from where the market for marine
commerce will be supplied.The major factors that may increasingly determine this is
the growth of the Asian market (mainly China) and the strength of Singapore as a
major financial sector.
59
60
MARINE INDUSTRIES GLOBAL MARKET ANALYSIS
MARINE INDUSTRIES GLOBAL MARKET ANALYSIS
8 Ports
61
Irish Market €M
1999–03
2004
2005–09
832
150
780
UK Market €M
10,429
1,842
9,595
Europe Market €M
58,695
10,478
54,569
World Market €M
141,979
25,017
135,526
Definition – port revenues based on average prices per tonne of cargo loaded and unloaded.
8.1 INTRODUCTION
The Ports & Terminals Guide lists 8,336 ports and terminals worldwide. Perhaps some
1,600 or so of these are significant ports. In 2002, the top 50 ports handled 5.8 billion
tonnes of cargo. In 2003 vessel calls at world ports totalled 576,906.33
Figure 8.1: Ports – World Market
Ports are a major benefactor from the strong growth in economic activity in China
and to a lesser extent India. Rotterdam increased its tonnage by 8% in 2004 and
Amsterdam by 13%.
European ports’ container traffic showed a 10% increase to 60 million TEU (twenty
foot equivalent units) in 2003 and it appears that this will be exceeded in 2004. Initial
figures from Rotterdam show a 16% surge in container traffic to 8.3 million TEU in
2004 and Hamburg achieved its fifth year of double digit growth.
However, container shipping capacity is growing faster than capacity of many ports to
receive it. Concerns have been expressed as to whether the European container
terminals and their hinterland connections can adequately adjust to the continuing
sharp increases in container volumes in a timely manner. US ports are also
experiencing severe congestion.
The result is the need for very large investment in expanding port capacity
worldwide. For example, Shanghai is spending $10bn in building what it expects to
be the world’s largest container port. Kuwait is to build a $1.2bn container port
becoming operational in stages from 2008. Spain has announced a plan to spend
€23bn on the maritime and ports sectors over the 15 years to 2020 – the proposal
particularly aims to boost short-sea shipping. New York’s capital improvements in
2005 total $1.7bn.
8.2 WORLD MARKET
The Ports sector worldwide was worth €25bn in 2004. Despite the considerable
numbers of ports, the majority of traffic, 5,700 billion tonnes, flows through the top
50 ports. A practical problem in assessing the market is that most ports do not issue
annual reports that show total sales revenues, but only show tonnage.34
Source: Douglas–Westwood
Table 8.1: Ports – World Market
1999–03
Africa
Asia
3152
569
3083
32198
5988
34632
Australasia
1849
328
1779
E Europe/FSU
6363
1310
7095
Latin America
7964
1248
6762
Middle East
4641
823
4459
North America
27117
4273
23147
Western Europe
58695
10478
54569
141979
25017
135526
TOTAL (€M)
Source: Douglas-Westwood
Figure 8.2: Ports – Regional Segmentation
2005–2009
Annual reports of some of the largest ports suggest rates per tonne of between
€1.12 to €1.67, whereas the smaller ports can be €2.82 to €3.78. Using these prices
suggests a total turnover for the world ports sector of €26.5 billion in 2003. Since
1999 the sector (in € value terms) increased to €31 billion in 2001, then returned to
previous levels by 2004, at €25 billion. Analysis of projections of global trade forecasts
33
‘Vessel Calls at US Ports 2003’, US Department of Transportation, Marine Administration Department.
34
e.g. ‘The US Public Port Finance Survey’ relies on voluntary responses and shows net income and tonnage.
2004 2005–09
Source: Douglas–Westwood
62
MARINE INDUSTRIES GLOBAL MARKET ANALYSIS
suggests the sector will grow to €28 billion by 2009. It should be noted that these
values exclude ports’ added-value activities. Also privately-owned tanker terminals and
passenger operations may not be fully included in these values.
8.3 EUROPEAN MARKET
In 2002, Europe had 985 ports of which 285 handle over one million tonnes of
traffic.35 On average they handle 3.5 billion tonnes of cargo per year and 350 million
passengers – the equivalent of 70% of the entire European population. Europe’s share
of the market amounted to €10.5 billion in 2004.
In Europe the port liberalisation programme started many years ago with the result
that EU ports have been stated to be the cheapest in the world.The European
Transport Workers Federation claim costs for container handling in Europe averages
$100 against $200 for the US and $300 for Japan.
Table 8.2: Top Eight Operators by TEU
TEU (M)
% Share
HPH
41.50
13.3%
PSA
28.70
9.5%
APM
21.40
6.2%
P&O Ports
16.00
4.6%
Eurogate
10.80
3.5%
DPA/DPI Group
9.55
3.0%
Cosco
7.40
2.3%
Evergreen
6.70
2.1%
Sub-Total
142.05
44.5%
TOTAL (World)
319.61
100%
Source: Drewry Shipping/Lloyd’s List
8.4 CONTAINER OPERATIONS
The great majority of ports are in public ownership and as a result some suffer from
low productivity (particularly in the US). However, capital investment requirements
are resulting in privitisation or ‘liberalisation’ programmes in a number of countries.
The ports that are in private ownership are often focused on container handling.
Drewry’s database records almost 1,500 facilities worldwide. In 2003, the top eight
global operating companies handled 142 million TEU, 44% of all containers shipped
through ports.The revenues are available for two of these (HPA and P&O Ports)
which together are responsible for 18% and total €3.8bn. Scaling up suggests the
container sector of the dry-cargo ports world market is €22.7 billion.
There is significant international mergers & acquisition (M&A) activity – recently
Dubai Ports International acquired the Hong Kong Port operator for $1.23bn.
The sector is divided into:
• Global Stevedores – whose primary function is port operations.
• Global Carriers – where terminals are used to support container liner services.
• Hybrids – originally carriers, but increasingly operating their terminals as standalone business units.
35
Eurostat
MARINE INDUSTRIES GLOBAL MARKET ANALYSIS
The integration of shipping, terminal operations and road transportation
services means the total value of the container sector greatly exceeds the port
operations element.
63
Figure 8.3: Chinese Port Container Throughput
Globally, the trend continues in the move away from traditional bulk and break-bulk
(non-containerised) shipping, into unitised cargoes (containerised and roll-on/roll-off)
traffic.Worldwide seaborne dry cargo traffic has doubled from 1.8 billion tonnes in
1980 to a forecast 3.6 billion tonnes in 2004, according to Drewry’s statistics.
The 2003 total was 3.4 billion tonnes and the figure is expected to have risen to
3.78 billion in 2004. (These figures include bulk, break-bulk, ro-ro, semi-bulk and
containers, but not liquid bulks.)
In 1980 containers represented 6.3% of world traffic. In 2003 they accounted for
23.8% and this is expected to rise to 26.6% – 386 million TEU (twenty-foot
equivalent units) – in 2004. By 2010 container port throughput should reach
432 million TEU.This represents total world container port throughput, including
transshipment, when hub ports are used to switch containers from one ship to
another.The main catalyst for growth is Chinese export activity.36
8.5 ECONOMIC IMPACT
The sector is of particular importance due the generation of considerable economic
activity which is a multiple of port revenues.
In the case of Rotterdam, in 2003 5,741 persons were associated with cargo handling,
but the total direct port-related employment was 44,384 and in addition another
14,391 were in port ‘industries’ such as oil refining, shipbuilding & repair, etc.
In addition to the 58,739 in ‘direct port-related employment’, it is claimed that the
port generates indirect employment to 250,000 people.
8.6 THE LONG-TERM – 2010 ONWARDS
Global port activity is set for long term growth, driven by increasing seaborne trade
with the world’s developing economies. More capital expenditure will be required to
expand port capacity and tackle growing congestion. Growth of the cruise market
will also bring opportunities for port development.Within Europe, an added
dimension will be the desire to increase short haul shipping to counteract growing
congestion of land transportation systems.
36
‘Lifeblood of the Global Economy’Times Online quoting from Drewry Shipping Consultants 7 Sept 2004.
Source: Drewry Shipping/Lloyd’s List
64
MARINE INDUSTRIES GLOBAL MARKET ANALYSIS
MARINE INDUSTRIES GLOBAL MARKET ANALYSIS
9 Cruise Industry
65
Irish market €M
UK market €M
1999–03
2004
2005–09
–
66
–
5,220
1,104
6,458
Europe market €M
11,178
2,365
13,829
World market €M
54,570
12,000
67,436
Definition – revenues of cruise vessel operators.
9.1 INTRODUCTION
The cruise industry offers large potential with major investments being made in
cruise terminals worldwide.The world market is of the order of €12bn however, the
total economic benefit is at least twice that value.
Figure 9.1: Cruise – World Market
The cruise industry is US-dominated and the US market is generally acknowledged
to account for more than 70% of passengers.The UK is the second largest source
market and strong growth is occurring in Germany. Asia was the fastest growing
source market in the 1990s before regional economic problems but growth is
expected to resume again.
In 2003 total spending by the cruise lines and passengers in the US was $12.9bn, but
the total economic benefit was $25.4bn resulting in the generation of 294,000 jobs.37
US ports reported 7.1 million passenger embarcations.
On average, a 2,000 passenger ship with 950 crew members generates some $240,000
in on-shore spending per US port call.
In common with a number of the marine sectors the cruise industry is an
international business. Passengers may fly from their home country in Europe to, say,
Miami to join a cruise which visits a different Caribbean country each day. Each
passenger is reported to spend $112 per port visit. In 2003, direct purchases in
Florida, home to the world’s largest cruise port Miami, totalled $4.5bn.
Source: Douglas–Westwood
Table 9.1: Cruise – World Market
1999–03
USA
38562
Western Europe
Others
TOTAL (€M)
2004 2005–09
8254
44822
11178
2365
13829
4830
1381
8785
54570
12000
67436
Source: Douglas-Westwood
In 2003 there were 258 cruise vessels registered. After a period of overbuilding of
cruise vessels, and an anticipated downturn in passengers the cruise industry is again
growing strongly. Since 2000, the US industry alone has added 20 ships with 50,000
‘lower berths’. At the end of 2004, 21 ships were on order with a capacity of 55,000
lower berths.
9.2 WORLD MARKET
The world revenues for cruise sector operators was estimated at €12 billion in 2004.
Historically, the sector has grown from being worth €7.7 billion in 1999, representing
a 56% growth over the period to date. Strong growth is expected globally resulting
in a 4.4% average annual growth during the forecast period reaching €14.8 billion
in 2009.
37
‘The Cruise Industry 2003 Economic Survey in the US’ International Council of Cruise Lines.
Figure 9.2: Cruise – Regional Segmentation
2005–2009
Source: Douglas–Westwood
Note:This is a very complex market to analyse.Values
in charts & tables above relate to port of embarkation.
Different values and segmentations apply to source
markets (origin of passengers), ports-of-call, cruise vessel
companies’ locations and vessel owners’ locations. In
addition, and in common with other sectors, much
higher values apply to total economic benefit derived by
a country. Country values are for cruises in northern
European waters.
66
MARINE INDUSTRIES GLOBAL MARKET ANALYSIS
Figure 9.3: European Cruise Destinations
(Million Passengers)
9.3 EUROPEAN MARKET
2.7 million Europeans took cruise holidays in 2003 and of these 2 million were in
European waters.38 This resulted in 8.5 million passenger calls in European ports.
Strong growth is expected with European passengers increasing to 4 million in 10
years.There is a significant growth of smaller specialised cruises in Northern
European waters. (This mirrors the reported increasing use of smaller ports by the US
industry, but in the US much of this is generated by passengers driving to
embarkation ports.The growth of the US drive-to market and indeed some of the
strong US growth may be a function of passengers’ reluctance to fly after 9/11.)
Source: European Cruise Council 2004
In mainland Europe, Spain is the largest source market, Bilbao is spending
€13.2 million on a new cruise terminal.
In Ireland, ship visits increased from 77 in 2000 to 127 in 2003 and Cork and Dublin
had a total of 75,124 passenger ‘calls’ in 2004 out of a European total of 4.3 million.39
Purchases of goods & services in Ireland totalled €66 million sustaining 484 full
time jobs.40
The Cruise Ireland report shows the direct and overall contribution at each Irish port was:
• Cork: €10.48 million direct, €19.79 million overall and 149 full time equivalent jobs.
• Dublin: €16.18 million €30.55 million overall and 227 full time equivalent jobs.
• Waterford: € 4.63 million €8.74 million overall and 61 full time equivalent jobs.
Cruise industry operators are dominated by the USA, followed by Norway. A primary
characteristic of the main players is the large size of their vessels.The average age of
the fleet is about 18 years with Greece being the exception at 37 years.
9.4 THE LONG-TERM – 2010 ONWARDS
The Cruise Ireland report notes that “the international cruise industry has
experienced very significant growth over the past five years and offers further
potential as it continues to be the fastest growing sector in the travel and leisure
industry.The cruise companies see their industry as profitable and resilient and
continue to invest and expand their operations.”
The industry is set for long-term growth as whole new market sectors are developed.
These include the more casual family oriented ‘resort’ ships and smaller ships
more associated with cultural tours. It is notable that much cruise industry activity is
repeat business.
38
European Cruise Council 2004 (first statistics)
39
GP Wild reported in Lloyd’s cruise International Aug/Sept 2004
40
Report to Cruise Ireland, March 2004.
(If this ratio is applied across all of Europe then a total economic benefit of €3.7bn is suggested).
MARINE INDUSTRIES GLOBAL MARKET ANALYSIS
Table 9.2: European Country Passenger Calls
Country
Table 9.3: European Ports Passenger Calls
Table 9.4: Cruise Ships by Owner (end 2003)
Country
Total
Croatia
370,617
1
Barcelona
Spain
832,853
US
85
118,340
1,392
Denmark
335,056
2
Palma Majorca
Spain
664,568
Norway
37
62,540
1,690
Estonia
198,205
3
Venice
Italy
637,258
Malaysia
18
28,462
1,581
Finland
350,570
4
Southampton
UK
536,493
Greece
21
13,622
649
France
29,628
5
Naples
Italy
535,590
Japan
8
5,921
740
Germany
267,396
6
Civitavecchia
Italy
521,616
Monaco
12
6,217
518
Greece
492,985
7
Piraeus
Greece
492,985
France
5
5,038
1,008
Iceland
39,060
8
Savona
805
Ireland
75,124
9
Dubrovnik
2,524,093
10
Livorno
Latvia
52,621
11
Helsinki
Netherlands
82,955
12
Copenhagen
Norway
323,236
13
St Petersburg
Poland
62,734
14
Tallinn
Portugal
197,855
15
Russia
242,862
16
Spain
1,694,393
Sweden
UK
8,525,743
Italy
TOTAL
Total
67
Berths Av. Berths
Italy
468,876
UK
8
6,439
Croatia
370,617
Switzerland
5
4,648
930
Italy
360,753
Germany
8
2,856
357
Finland
350,570
Others
Denmark
335,056
Total
Source: ISL
Russia
242,862
Estonia
198,205
Stockholm
Sweden
197,964
Lisbon
Portugal
197,855
17
Dover
UK
195,543
269,231
18
Oslo
Norway
127,893
917,122
19
Bergen
Norway
122,361
Spain
112,791
20
Cadiz
Source: Lloyd’s Cruise International
21
Warnemunde/Rost. Germany
95,403
August/September 2004
22
Harwich
UK
86,843
Spain
84,181
Germany
83,821
23
Vigo
24
Kiel
25
Amsterdam
26
Visby
27
Gdynia
28
Bremerhaven
29
Riga
30
Guernsey
31
Dublin
32
Honnigsvag/Nordkapp Norway
39,871
33
Reykjavik
Iceland
39,060
34
Tromso
Norway
33,111
35
Cork/Cobh
Ireland
32,003
36
Le Havre
France
29,628
37
Hamburg/North Sea Germany
26,358
38
Forth Ports
UK
24,872
39
Falmouth
UK
23,344
Netherlands
82,955
Sweden
71,267
Poland
62,734
Germany
61,814
Latvia
52,621
UK
50,027
Ireland
43,121
Source: Lloyd’s Cruise International
August/September 2004
Ships
51
20,481
402
258
274,564
1,064
68
MARINE INDUSTRIES GLOBAL MARKET ANALYSIS
MARINE INDUSTRIES GLOBAL MARKET ANALYSIS
10 Marine Tourism
69
1999–03
2004
2005–09
709
155
848
Irish Market €M
UK Market €M
Definition – all expenditure on seawater and freshwater angling, sailing and boating inland and
at sea, water sports and inland cruises. Excludes travel and accommodation, and other trips to
the beach, etc.
10.1 INTRODUCTION
The Marine Tourism sector is a difficult sector to gain precise information on,
because few countries produce statistics covering all activities. However, there are
some statistics for individual leisure activities such as angling and boating.
–
–
–
Europe Market €M
328,302
71,812
392,695
World Market €M
762,345 168,189
928,267
Figure 10.1: Marine Tourism – World Market
If we define marine tourism to comprise seawater and freshwater angling, sailing and
boating (both inland and at sea), water sports and inland cruises, we estimate the
world marine tourism market in 2004 as €168 billion.This figure is approximately
11% of total tourism revenues globally (€1,523 billion).
Comparable Irish figures for the same activities in 2003 are €151 million; however,
the sector as a whole is worth €566 million when other activities relevant to the
Irish market are included (such as whale watching and trips to the seaside).41
10.2 WORLD MARKET
In 2004 we estimate the value of marine tourism in the world to be €168bn.
In general the tourism sector, including marine tourism, has grown significantly in
recent decades and is a huge industry. Expressing world totals in euros seems to
show a decline from 2002 to 2003, although in dollars the reverse is true, again
demonstrating the depreciation of the dollar against other currencies.
Source:
World Tourism Organization
Douglas–Westwood
The available international tourism data normally refers to international tourism
receipts, which does not include the huge domestic market.There is information
available for the UK & US, which puts UK tourism expenditure at €107 billion in
2003, only 18% of which was from international tourists.The US situation is similar
with 12% of expenditure from international tourists.
Table 10.1: Marine Tourism – Industry
Segmentation 2003 (€ millions)
By making assumptions on the proportion of domestic to international tourism in
each region, a total tourism value for the world can be estimated. Generally,
developing areas are thought to display the reverse situation of the likes of the US or
UK, with high proportions of international tourism. By applying the proportions, by
region, to the known data on international tourism receipts a figure of total tourism
can be derived.42 Total world tourism in 2004 is estimated at €1,523bn.
Irish Marine Institute, NMMA and ICOMIA.
Then to value ‘Marine Tourism’, a percentage of each world region’s total tourism
was estimated.This gives the world marine tourism market in 2004 as €155 billion,
11% of all tourism.This percentage varies widely between regions.
41
‘A National Survey of Water-Based Leisure Activities in Ireland 2003’ Marine Institute.
42
World Tourism Organisation, ‘Tourism Highlights’ Edition 2004.
Leisure Boating
Total Tourism
Ireland
UK
USA
World
33
1,715
26,511
[33,139]
971 106,872 490,509 [1,523,433]
Source: Douglas-Westwood, BMF,
NB: Data in brackets is estimated.
70
MARINE INDUSTRIES GLOBAL MARKET ANALYSIS
Another way of calculating the value of world marine tourism could be to apply a
multiplier to the Leisure Boating Industry Revenues to estimate ‘Marine Tourism’
but this approach was not found to be viable.43
10.3 EUROPEAN MARKET
We value marine tourism in Western Europe at €72bn in 2004. Over the five years
to 1999 this totalled €328bn.We expect growth to continue its long-term trend of
3% annually, and over the period 2005-2009 to total €393bn.
Within Europe, again the only available data for any form of marine tourism is
the ICOMIA statistics for the sales of boats and related equipment & accessories.
New leisure boat sales for Ireland totalled €14 million in 2003 compared to
€324 million for the UK.
10.4 MARINE LEISURE BOATING
Marine ‘Leisure Boating’ is a major sub-sector which includes boat sales, repair
& building, marina operators, yacht charter and chandlery.
According to BMF (British Marine Federation) statistics the British marine leisure
boating industry grew by 8.5% in 2004, increasing its turnover to a total of
£1.9 billion (€2.85bn).44 In six consecutive years of growth from 1999 to 2004,
the revenue of the UK leisure boating industry has increased by 57%.
The industry has also shown considerable strength in the export market, growing by
5.6% and bringing in £839 million (€1.26bn) to the UK economy.
The BMF is forecasting further growth in 2005 of 3.3% which would take total
industry revenues to over £2 billion (€3bn) for the first time.The industry employs
approximately 30,000 people.
Leisure boating involves craft of many sizes, from the sailing dingy to the superyacht.
Superyachts (yachts greater than 80 feet in length), represent a particularly important
sector for some countries with 651 presently on order worldwide. Market leaders are
Italy, the US, the Netherlands, the UK,Taiwan, Germany and New Zealand.
The development of the sector in Taiwan is particularly interesting as the leisure
boatbuilding sector has been in decline. Increasing costs caused the leisure
boatbuilding sector to fall from $200 million in 1987 to $75 million in 1994 and 70%
of the yards closed.The remaining players ventured into luxury yacht production and
43
Ireland is the only country that there is available data on which to make this comparison.The boating industry is of varying
importance to tourism in general, by country (Ireland: 12%, UK: 2% & US: 5%).This is probably due to the leisure boat industries
in different countries varying massively in their make up and overall size. For example, new boat sales make up different proportions
of the leisure boating industry (Ireland: 14%, UK: 19% & USA: 35%).There are also likely to be big differences between regions,
especially comparing the developed and developing world. For these reasons, this approach was not used.
MARINE INDUSTRIES GLOBAL MARKET ANALYSIS
revenues grew to an estimated $180 million (€144 million) in 2004. A special yacht
manufacturing zone is now being built in southern Taiwan.45
10.5 THE LONG-TERM – 2010 ONWARDS
The forecast for world international tourist arrivals suggests a 4.1% annual growth
rate from 1995 through to 2020.Therefore, it is reasonable to assume that marine
tourism will also continue its increase.
Europe’s growth rate is lower at 3% over the same period. Applying this same
percentage growth to marine tourism suggests a market value of €198 billion in 2009.
44
‘British Marine Federation statistics’ 2005.
45
Financial Times, p28, 31 Jan 05
71
72
MARINE INDUSTRIES GLOBAL MARKET ANALYSIS
MARINE INDUSTRIES GLOBAL MARKET ANALYSIS
11 Ocean Survey
73
Irish Market €M
UK Market €M
Definition – all expenditure on seabed survey and shallow seismic survey for civil purposes, such
as navigational charts and oil & gas. Excludes deep seismic.
11.1 INTRODUCTION
Survey of the oceans for civilian purposes has a number of distinct sectors including
hydrographic survey for the production of navigational charts, exploration and
development of oil & gas reserves, port & harbours, submarine cable routes, windfarm
installations, etc.
1999–03
2004
2005–09
64
12
54
608
104
517
Europe Market €M
3,201
538
2,722
World Market €M
11,715
2,013
10,137
Figure 11.1: Ocean Survey – World Market
Ocean Survey is a large activity, with some 737 vessels worldwide having significant
survey capability.The number of vessels operated by national hydrographic agencies
alone total 322 and these have crews exceeding 8,700 people.46
The production of hydrographic survey equipment is also a major activity,
(although we exclude it from this section.) When this is included, our view is that
perhaps 18,000 people are employed in various forms of activities related to ocean
survey worldwide.
11.2 WORLD MARKET
We forecast that the world market will exhibit a long-term growth trend, with
Western Europe and North America continuing to be the regions of greatest activity.
In 2004 the world value of ocean surveying was €2 billion.The world market
exhibits a long-term growth trend if analysed in US dollars, and stable if represented
in euros, due to the decline in value of the dollar over time, in relation to the euro.
Due to the impact of external factors, the commercial contracting industry has
experienced major cycles. 1999 represented a cyclical low due to the impact of the
1998 oil price fall, but in 2000 business rose strongly from the submarine cable sector
which itself collapsed in 2001–2002.The submarine cable sector had attracted
significant resources that were released into the wider market in 2001–2, depressing
prices. Our five-year forecast shows hydrographic charting as the largest sector,
followed by oil & gas and port & harbour survey.
11.3 EUROPEAN MARKET
Europe is a major player in this high tech sector (€538 million in 2004), which is
dominated by the Netherlands.There is also emerging market potential associated
with the commissioning of EEZ surveys.The UK forms the largest European market
due to the combination of its oil & gas industry surveys and hydrographic activity.
Norway is also significant due to its oil & gas activity. Activity in the other significant
markets is mainly a function of hydrographic surveys. Ireland has good experience
(having completed the world’s largest EEZ survey) but has no major player.
46
IHO Yearbook 2003
Source: Douglas–Westwood
Table 11.1: Ocean Survey – World Market
1999–03
Africa
Asia
Australasia
2004 2005–09
383
80
439
1559
270
1363
313
59
285
E Europe/FSU
2310
401
2044
Latin America
664
118
617
Middle East
152
35
160
North America
3133
511
2507
Western Europe
3201
538
2722
11715
2013
10137
TOTAL (€M)
Source: Douglas-Westwood
Figure 11.2: Ocean Survey – Regional
Segmentation 2005–2009
Source: Douglas–Westwood
74
MARINE INDUSTRIES GLOBAL MARKET ANALYSIS
Figure 11.3: Ocean Survey – European
Segmentation
11.4 BUSINESS SECTORS
The largest activity is hydrographic survey, a ‘market’ we value at €1.4 billion.This is
the process that is used to produce the navigational charts essential for safe transit of
vessels. Surveys are usually commissioned by nations’ hydrographic offices, often using
naval survey vessels plus, in some instances, civil contractors. In addition there is a
major activity in support of defence requirements (such as the navigation of nuclear
submarines) but this is excluded from this report.
Source: Douglas–Westwood
Figure 11.4: Ocean Survey – Sectors
It is very difficult to determine the total world expenditure on hydrography as only
16 of the IHO listed countries report their figures.The known expenditure of the 16
countries totals €352 million for production of about one quarter of the world’s
marine charts. Scaling up suggests a total annual spend of at least €1.4 billion.We say
at least as much of the survey operation is, in many cases, carried out using naval
vessels and personnel and in most instances these costs are probably not included in
the figures.
We estimate that the market for the sale of hydrographic charts exceeded €582
million in 2003.
Source: The World Ocean Survey Report,
Douglas–Westwood
Offshore oil & gas industry survey is valued at €302 million in 2004.The industry
relies upon survey & positioning for exploration and facilities planning, construction
and maintenance and this forms the largest commercial activity. Exploration surveys
(excluded from this report) carried out by seismic survey vessels locate and map the
reservoirs.This phase also includes exploration drilling using rigs that must be precisely
positioned and orientated.The planning and installation of offshore production
platforms and pipelines requires accurate survey techniques and precise positioning.
For nearly two decades Western Europe was the world’s largest offshore oil & gas
survey market and then during the 1990s the North Sea followed the US Gulf of
Mexico into maturity and then into the beginnings of long-term decline.The Gulf of
Mexico meanwhile received a new lease of life as deepwater fields were developed.
Over the next five years we expect Africa to show greatest growth, and to a lesser
extent Latin America, but North America (mainly the US Gulf of Mexico) will decline.
Growth mainly relates to the field development activity. Although business in individual
regions will change, the overall effect is one of a reasonably constant oil & gas industry
world market as declines in mature regions are balanced by gains in others.
MARINE INDUSTRIES GLOBAL MARKET ANALYSIS
Ports & harbours – €233 million (2004). Most of the tonnage of international cargo
is moved by sea and this involves the use of over 7,000 ports & harbours world-wide
and over 2,000 of these can be regarded as significant ports – in other words, they
carry out survey work. Major commercial ports do this using in-house hydrographers
although there is a small amount of contracted commercial activity.
Although there is a requirement to conduct the survey of ports and harbours on an
ongoing basis, the amount of money available for this process is fundamentally a
function of the number of ship movements through ports.The tonnage of goods
moved by sea is a function of national GDP and the above table is based on our views
of regional GDP growth over the period.The routine expenditure patterns are
complicated by major port development but as these tend to stretch over several years
the effect is ‘smoothed’ significantly.
We expect a continuing growth in port & harbour survey expenditure, with the US
being by far the largest region. Here the US Army Corps of Engineers is responsible
for a considerable proportion of national expenditure.
Submarine cables – €16 million 2004. Route survey is a critical part of the
installation of submarine cables and is now even more so due to changes in fishing
and shipping activities.This activity collapsed with the end of the ‘dotcom’ stock
market boom and released additional capacity into the other S&P sectors.
After a rapid climb to an annual peak of nearly €104 million in 2000, the installation,
and correspondingly the survey of submarine cable routes, virtually ground to a halt
in 2002.This had the spin-off effect of releasing survey capacity (and ROVs working
on cable burial) into the major market sector, oil & gas, elongating a period of low
prices caused by the earlier oil price fall. A further, but less publicised factor was the
development of technology allowing more capacity on the fibre-optic cables. A very
slow upturn in business is expected as the global economy recovers.
Exclusive economic zones – €23 million 2004.The definition of exclusive
economic zones (EEZ) outside the 200 nautical mile limit under the United Nations
Convention on Law of the Sea (UNCLOS) requires the use of S&P to determine the
location of the outer edge of the continental margin at a depth of 2,500m.
A successful claim can give a nation rights over hundreds of thousands of kilometres
of ‘seabed real estate’ and the associated oil, gas and mineral rights.
75
76
MARINE INDUSTRIES GLOBAL MARKET ANALYSIS
The seven-year, €32 million survey of Ireland’s seabed formally commenced its
fourth year of data acquisition in May 2003 and was the largest marine survey ever
undertaken anywhere in the world.47 The Celtic Explorer, the main survey vessel, was
one of six ships and one aircraft employed in the survey and detailed studies of
420,000 sq km of the seabed have been completed.The shallow-water Phase 2 is
now underway.
EEZ survey is a particularly difficult market to value. Considerable survey work is
required by nations to prove-up the basis for their claims and this may be carried out
by survey vessels operated by national hydrographic offices or navies, by research
organisations, by commercial contractors or a combination of all three.Whatever
resources are used these surveys, although few in number, are of significant scope
and cost.
A further complicating factor in market valuation is the seeming secrecy reported by
some informed individuals. However, some costs (such as the major Irish survey
discussed earlier) are in the public domain and from this and known tender
opportunities a view of expenditure can be given. Overall, we expect a general rise in
spend over the period.
Offshore windfarms – €1.6 million (2004).The identification and assessment of
locations suitable for offshore windfarms (and in the future wave and ocean current
devices) involves the S&P industry in the mapping of the seabed environment.
There are many other small activities.These include location and mapping of
shipwrecks and downed aircraft, sea bed mining of minerals ranging from diamonds
to sand & gravel, installation of electricity cables to offshore islands, etc. Due to their
small size or intermittent nature we do not value such activities in this report.
Although there has been strong development in the business of supplying
electronic charts, there is little evidence to date of the commercial survey contractors
becoming involved in a sector that offers significant business opportunities and
diversification potential.
11.5 TECHNOLOGICAL CHALLENGES
Ocean survey is a technology business with large amounts of money invested is
survey vessels’ data gathering and processing systems.
47
http://www.gsiseabed.ie/main.htm
MARINE INDUSTRIES GLOBAL MARKET ANALYSIS
Major advances of the past decade have included the almost universal use of
multibeam sonars as the primary tool for data gathering, differential global positioning
(DGPS) as the primary navigation tool and use of advanced sonar data processing.
Ocean survey technology is probably more likely to move forward in a process of
incremental developments rather than by major breakthroughs. Examples of the
former include the commercial application of synthetic array sonar (itself an old
concept increasingly enabled by the improvements in underwater positioning) and the
application of increasing amounts of processing power.
In our view, major potential lies in the application of autonomous underwater vehicles
(AUVs) to ocean survey. Long a tool of academia, outstanding results have been
obtained in deepwater commercial operations in the Gulf of Mexico, off West Africa
and the North Sea. However, the major challenge and indeed opportunity lies in
applying the technology to increase survey efficiency in lesser water depths and attack
the commercial dominance of the survey vessel as the conventional survey platform.
11.6 THE LONG-TERM – 2010 ONWARDS
Ongoing survey of the sea and oceans is a fundamental need for the establishment
of governance mechanisms, continuance of world trade and the extraction of
ocean resources.
Increased awareness of the importance of the oceans to the overall environment is
likely to increase spending on ocean survey.
Much of the work carried out by countries’ hydrographic offices for the production
of navigational charts is based on data gathered by naval survey vessels, a practice
which is difficult to economically justify in a situation where such services can be
bought more cheaply from commercial contractors. However, we expect that the
economic argument will increasingly prevail.
The growth ambitions of the main commercial contractors together with the fall-out
resulting from business cycles has meant that rationalisation and consolidation
activities have been extensive in the S&P market with one truly global player
emerging (Fugro, Netherlands) and two mid size ones (C&C, US and Gardline, UK)
together with a number of small, mainly national players.
77
78
MARINE INDUSTRIES GLOBAL MARKET ANALYSIS
We have long believed that for many commercial contractors ocean survey is a market
that is too small to meet their shareholders’ growth objectives and companies are
expanding their activities in to areas such as seismic survey.
MARINE INDUSTRIES GLOBAL MARKET ANALYSIS
12 Submarine Telecoms
79
Irish Market €M
UK Market €M
Europe Market €M
Definition – capital expenditure on the manufacture, supply and installation of submarine
telephone cables.
12.1 INTRODUCTION
Fibre-optic cables were introduced in 1988. In the next 9 years the investment in
fibre-optic cables totalled $19.8bn.The rapid growth of the internet then caused
traffic volumes to increase at 80–100% per annum. About 40,000 km of cable was
installed in 1998 and over 190,000 km in 2001 at a cost of over €8 billion.
World Market €M
1999–03
2004
2005–09
–
–
–
–
–
–
3312
185
1915
21,270
1,126
11,646
Figure 12.1: Submarine Telecoms –
World Market
Expected investment in the period 2001 to 2004 was $36 billion48 and in 1999 a
contract was signed for construction of 13 installation & maintenance ships for the
proposed ‘Project Oxygen’.Then in 2001 “dotcom” technology stocks crashed,
causing cable installations to virtually grind to a halt. Projects underway caused the
bottom of the market not to occur until 2003.
Considerable amounts of capacity had been brought into being to satisfy the boom;
survey vessels, cable lay and burial vessels and the associated hardware such as ROVs
and human resources.The collapse of the submarine cable market had major
repercussions for these suppliers and caused hardware to be made available for work
in the oil & gas sector, depressing day-rates.
The situation was exacerbated by a massive increase in the capacity of individual
cables.TAT11, laid in 1996, had a capacity of 1.6 Gbits/second.The 1999 transAtlantic cable, Gemini, had a capacity of 60 Gbit/s. Cables planned for 2001 were
400 Gbits/s.49
12.2 WORLD MARKET
In 2004 the submarine telecom industry was valued at €1 billion.The historic data
we show is sourced from KMI. Our forward view is also based on our projection of
their short-term global forecasts of total km to which we have applied a regional
segmentation based on the location of past installations.This is, in practice, difficult to
achieve with accuracy as the submarine industry segments its markets by oceans (e.g.
Atlantic, Pacific, etc) rather than by regions and countries.We are not aware of
significant Irish capital investment in this sector.
Source: Douglas–Westwood
Table 12.1: Submarine Telecoms –
World Market
1999–03
1539
100
1036
Asia
8982
448
4628
Australasia
998
50
514
E Europe/FSU
171
10
108
Latin America
2575
138
1427
Middle East
721
40
409
North America
2972
156
1608
Western Europe
3312
185
1915
21270
1126
11646
TOTAL (€M)
Source: Douglas-Westwoo
Figure 12.2: Submarine Telecoms – Regional
Segmentation 2005–2009
Following the dramatic collapse of capital expenditure in the sector from 2001–2003,
we believe that growth is again likely. However, this will probably now be at a much
more measured pace than in past years. Slow long-term growth is now forecast for
submarine cable installations, to €3bn in 2009, representing average annual growth of
21.8% from 2005.
48
KMI Corporation.
49
Foot, D. ‘Underwater’. Summer 1998, p121.
2004 2005–09
Africa
Source: Douglas–Westwood
80
MARINE INDUSTRIES GLOBAL MARKET ANALYSIS
12.3 EUROPEAN MARKET
As a global business that views its markets by oceans, this sector is difficult to segment
by country or region, but the European share in 2004 is valued at €185 million,
constituting 16% of the world. Its historical activity was shaped by the global factors
impacting on the industry, outlined in the Introduction above.
MARINE INDUSTRIES GLOBAL MARKET ANALYSIS
13 Fishing
81
Irish Market €M
UK Market €M
1999–03
2004
2005–09
951
176
788
4,338
678
3,033
Europe Market €M
32,313
4,758
21,280
World Market €M
362,035
55,983
250,386
Definition – the value of captured fish and shellfish as defined by the FAO.
13.1 INTRODUCTION
Fishing is an important industry that is seeing growing demand, but the world catch
tonnage is falling as a result of serious resource problems and quota restrictions.There
are some opportunities offered by new species, however, aquaculture which is
subsidised in a number of countries provides serious price competition.The industry
faces a future of continuing global decline worldwide until a point of sustainability
can be reached.
Figure 13.1: Fishing and Aquaculture Production
Since 1996 capture fishing tonnage has been at best flat and has shown recent decline.
The growing world demand for fish and other seafood is being met by aquaculture
where tonnage growth over the period 1996 to 2002 averaged 7% and $ value
averaged annual growth of 4%.
Our five-year forecasts assume the value of the catch will stay constant from 2002
prices onwards.This assumption has been made on the basis of increasing production
of fish (including shellfish) from aquaculture, keeping prices steady.
Within Europe and elsewhere initiatives have been introduced, such as the EU’s CFP
(Common Fisheries Policy), with the aim of conserving remaining fish stocks.
Globally, the volume of captured fish has been decreasing slightly and this decrease
may appear more pronounced if the speculation about China, over-reporting its
production (by as much as 43%), are to be believed.50 In addition, the depreciation of
the US dollar against the Euro makes the decline more pronounced when values are
viewed in euros rather than dollars.
Marine fishing production can be viewed by tonnage and by value.The values are
derived from tonnage data in the Eurostat online database and further broken down
into molluscs & crustaceans (shellfish) and demersal & pelagic (finfish).The value of
each of these subsets was estimated, by country, using the FAO ‘World Fishery
Production: estimated value by group of species’ table, containing annual data from
1999–2002.
50
Delgado, C et al, , ‘The future of fish, issues and trends to 2020’ FAO.
Source: FAO and Eurostat
82
MARINE INDUSTRIES GLOBAL MARKET ANALYSIS
Figure 13.2: Fishing – World Market
13.2 WORLD MARKET
The global fishing industry is in decline, while demand has grown dramatically. In the
last 50 years fish consumption per person has doubled. Japan, the US and the EU are
major seafood markets that depend on imports for approximately half of their
consumption.51 The value of Asian production was greater than any other region in
2004, at over €31 billion. Latin America’s value was nearly a quarter of Asia’s, with
North America not far behind.
World fish consumption has been increasing since the 1960s, due to population
increase and lifestyle factors, such as increased awareness of health benefits. Fishing
technology has advanced over the years to increase catches. As a result of this overfishing (and pollution) the ocean population of edible fish has decreased by 90%
during the last 50 years.The only way to bridge the gap between reduced capture
fisheries output and increased world demand is through aquaculture.
Source: FAO, Eurostat and Douglas–Westwood
Table 13.1: Fishing – World Market
1999–03
Africa
2004 2005–09
16401
2583
11550
201183
31387
140377
6100
939
4198
E Europe/FSU
14698
2091
9351
Latin America
48698
7403
33108
3020
501
2242
39622
6323
28278
4,758
21,280
Asia
Australasia
Middle East
North America
Western Europe
TOTAL (€M)
32,313
362,035
55,983 250,386
Source: FAO, Eurostat and Douglas-Westwood
Figure 13.3: Fishing – Regional Segmentation
2005–2009
In 2004 world marine capture fisheries production was at €56 billion. Historically,
production value was €67 billion in 1999, and is forecast to fall to €49 billion by
2009.The world catch tonnage is falling as a result of serious resource problems and
quota restrictions.There are some opportunities offered by new species. However, the
industry faces a future of continuing global decline worldwide until a point of
sustainability can be reached.This decline is forecast at a rate of 2.5% per year in
Euros (0.99% in US Dollars), based on historic trends.
13.3 EUROPEAN MARKET
Europe’s fishing production amounted to 8% of world production in 2004
(€4.7 billion).Within the EU, the UK, Spain, France and Denmark all have
production valued at approximately €500 million each, although within the whole
of Europe Norway is the clear leader, with an output three times the size at
€1.49 billion in 2003.The expansion of the EU member states in 2003 has increased
competition, but also increased the export market for Irish seafood.
A very high percentage of Irish exports are to the EU, although they declined by
10.2% from 2002 to 2003 (excluding fish landings at foreign ports – some of the Irish
quota is landed in Norway where there are better prices and facilities for 24/7
offloading).52 Meanwhile the domestic market experienced growth. Outside the EU,
a negative effect of the weak dollar has been felt, due to exports from the EU
becoming more expensive for non-EU consumers.
Source: FAO, Eurostat and Douglas–Westwood
51
FAO, ‘Projection of World Fishery Production in 2010’.
52
‘BIM Annual Review’, p8, 2003.
MARINE INDUSTRIES GLOBAL MARKET ANALYSIS
13.4 CHALLENGES
The fishing industry in Ireland is very fragmented with many small companies.These
smaller companies are suffering with the increasing burden of legislation. In addition,
cheap imports from the Far East into Europe have increased considerably and quotas
are shrinking.
Foreign supermarkets within Ireland such as Aldi and Lidl are able to undercut Irish
suppliers of processed fish products by 20%. Ireland has the additional disadvantage
of being a day further from markets than other parts of Europe.
To secure regular export orders to international supermarkets, the Irish fisheries
industry has to be able to supply the quantities on a regular basis, ideally with
shipments six days per week, rather than the traditional one or two. International
supermarket chains want to be provided with wide product lines that are QSP
(Quality Seafood Product) labelled, such as salmon, smoked salmon and mussels.
13.5 THE LONG-TERM – 2010 ONWARDS
Future increases in demand for fish is expected to be met by aquaculture, which
is growing rapidly.The contribution from capture fisheries will depend on how
effectively countries and regions can manage their fish stocks to sustain, or
optimistically to increase, fishable stocks.
The International Food Policy Institute and the FAO are collaborating on IMPACT
a global model of food supply and demand for 28 commodities. A paper based on
results in 2002 offered the following projections for fisheries (including capture
fishing and aquaculture):53
• Most growth will occur in developing countries which will account for 79% of
production by 2020. China’s share of production will grow whilst Japan, USA, EU
and FSU contract.
• Fishmeal and oil prices will rise by 18% as these are increasingly concentrated
into aquaculture.
• The share of aquaculture will increase worldwide.
53
Delgado, C et al. Fish as Food, Projections to 2020.
83
84
MARINE INDUSTRIES GLOBAL MARKET ANALYSIS
MARINE INDUSTRIES GLOBAL MARKET ANALYSIS
14 Marine Aquaculture
85
Irish Market €M
UK Market €M
1999–03
2004
2005–09
496
111
623
2,383
554
3,119
Europe Market €M
16,359
3,483
19,621
World Market €M
104,220
23,876
134,492
Definition – value of marine ‘farmed’ fish and shellfish as defined by the FAO.
14.1 INTRODUCTION
Due to the decline in global capture fishing, increasing consumer demand and the
low prices of its products, aquaculture is the fastest growing sector in the food
industry.54 Less than half of all aquaculture production comes from marine
aquaculture; the rest comes from freshwater areas.
SE Asia is a low cost producer and its exports have had particular impact in the US
where, despite a growth in fish and seafood consumption harvest values for nearly
every species have declined in 2001–2. (This also impacted on US capture fishing
values which declined 4% in 2002.) Between 1996 and 2002 annual average tonnage
growth was 9% and growth in US$ terms 4% (FISHSTAT). Continuing strong future
growth in demand is forecast. On a global basis investment in aquaculture will be
critical in growing world fish output.There are opportunities for new species
development and research opportunities in a number of areas.
Environmental issues and scares have at times depressed demand but this quickly
recovered. Norway leads European production and benefits from a strong
international brand.
Figure 14.1: Marine Aquaculture –
World Market
Source: Douglas–Westwood
Table 14.1: Marine Aquaculture –
World Market
1999–03
Africa
14.2 WORLD MARKET
Marine aquaculture production was valued at €24bn in 2004.With 70% of the
world’s production, Asia is the market leader. Asian production is valued at almost
€17bn in 2004, much of which supplies their own domestic markets. Forecast data
from 2003/4 onwards assumes a continuation of growth rate of marine aquaculture
production value at 4% per year (based on historical dollar growth rate trends),
reaching €29 billion by 2009.This trend is associated with aquaculture trying to fill
the gap left by a decline in capture fishing and also due to the low price of its
products (SE Asia is a low-cost high-volume producer). As with capture fishing, the
Asian values must be treated with caution, due to the large Chinese content and the
scepticism surrounding the high level of reported production (FAO).
Asia
Australasia
51
288
73,516
17,004
95,782
1,700
1,223
302
E Europe/FSU
7
1
4
Latin America
9,489
2,317
13,054
Middle East
North America
Western Europe
TOTAL (€M)
257
60
340
3,133
657
3,702
3,483
19,621
16,359
104,220
‘The State of World Fisheries and Aquaculture 2002’, SOFIA
55
‘Sea Technology’, January 2005, p50.
23,876 134,492
Source: Douglas-Westwood
Figure 14.2: Marine Aquaculture – Regional
Segmentation 2005–2009
In the case of the US, seafood imports (both capture and aquaculture) have grown
dramatically over the past decade and now represent 78% of all US seafood
consumption.The US now has a negative seafood trade balance of $8bn annually.55
54
2004 2005–09
235
Source: Douglas–Westwood
86
MARINE INDUSTRIES GLOBAL MARKET ANALYSIS
14.3 EUROPEAN MARKET
Marine aquaculture production in Western Europe (€3.5 billion in 2004) is ranked
second to Asia in regional production value (€17 billion), but this only amounts to a
fifth of Asia’s. According to available data, Eastern Europe’s production is very small
compared to Western Europe. As within the capture fisheries, Norway is the European
leader by far with its production equal to the combined production of the UK,
France and Spain. European production values are forecast to increase, in-line with
global estimates, at a rate of 4% per annum from 2005 to 2009.
Total European (EU25) production grew by more than 40%, from 1 million tonnes in
1993 to 1.4 million in 1999, and then declined very slightly.56 France, Italy, Norway,
Spain and the UK are the largest players. Norwegian production at 554,000 tonnes in
2002 is nearly twice that of its nearest rival Spain. (By comparison, Japan produces
about 1.3 million tonnes.)
Within Ireland a number of factors led to a decrease in salmon production from
21,423 tonnes in 2002 to 16,437 tonnes in 2003 (although trout farming was
unaffected).This was due to company receiverships, market issues, disease and other
unfavourable environmental factors. In addition, other countries are able to market
the same products at reduced prices. Price battles among retailers are also contributing
to the pressure to keep prices low – a situation that benefits consumers, whilst
damaging suppliers.
14.4 CHALLENGES
The reputation of farmed fish suffered with the publishing of a report in ‘science’ in
2004, on the levels of chemicals within the fish.The effect of the article highlights
how vulnerable the industry is to negative press. (There has been good development
of Irish mussels since the bio-toxin issue was resolved.) Aquaculturists’ freedom to
improve fish is limited by the need to consider the effects of new or modified fish on
the aquatic ecosystem and human health.The industry has to become more united
and sophisticated in its approach to marketing and promoting the sustainability and
health benefits of farmed seafood.57
It is thought that the US and Europe will continue to experience increased imports
from Asia.The challenge for exporters is to ensure that they supply safe, properly
labeled products.
56
‘Eurostat Yearbook’ 2004
57
‘Intrafish’, December 2004, p15
MARINE INDUSTRIES GLOBAL MARKET ANALYSIS
There is pressure on the location of marine aquaculture facilities as many suitable
locations are also desirable for tourism, shipping and water sports.
Fuel prices are also a concern within seafood companies with rising prices hitting
freight costs. In a highly competitive environment it is difficult for the seafood
industry to pass on these cost increases to their customers.
14.5 THE LONG-TERM – 2010 ONWARDS
The vast bulk of aquaculture production is made up of a small number of species and
there is no apparent reason why other species from among the several thousand that
are exploited by capture fisheries could not eventually be raised economically within
marine aquaculture. Awareness of the requirements of the environment so as to secure
a sustainable future must be at the fore of the considerations of the aquaculture
industry, complementing the concerns of the consumer and society.
A continuing consolidation of the seafood industry is expected. Fragmentation often
means inefficiency. Global consolidation is necessary as otherwise the largest
producers (Asia) who control the raw product will control the market, leaving Europe
and America at its mercy.
87
88
MARINE INDUSTRIES GLOBAL MARKET ANALYSIS
MARINE INDUSTRIES GLOBAL MARKET ANALYSIS
15 Seaweed
89
Irish Market €M
1999–03
2004
2005–09
10
–
–
UK Market €M
–
–
–
Europe Market €M
–
–
–
28,490
5,988
32,746
World Market €M
Definition – value of farmed and harvested seaweeds as defied by the FAO.
15.1 INTRODUCTION
Today seaweed is used as food, food supplements, fertilizers, cosmetics and for
medicinal preparations.The three main groups of commercial seaweed are red, brown
and green and production is harvested from wild and cultivated sources, with the
latter constituting the majority of the production.
15.2 WORLD MARKET
The value of the world seaweed market was almost €6 billion in 2004, over 90% of
which was cultivated, the rest wild. Asia is responsible for the vast majority of this
production, of which China and Japan are the main contributors.There is very high
market demand in Asia and China’s demand has outstripped the domestic supply, and
has had to resort to importing from countries such as Korea.The farming of seaweed
has expanded rapidly as demand has outstripped the supply available from natural
resources. Commercial harvesting occurs in about 35 countries, spread between the
Northern and Southern Hemispheres.58 At the start of the reported period seaweed
production was valued at €6.4 billion, then dipped in 2000, but the following years
have all seen growth, with such value of production forecast to be reached again in
2006. Forecast annual growth 2005–2009 is estimated at 3%.
Figure 15.1: Seaweed – World Market
Source: Douglas–Westwood
Table 15.1: Seaweed – World Market
1999–03
Africa
11
61
24,061
5,247
28,694
66
13
72
E Europe/FSU
515
126
692
Latin America
879
235
1,283
0
0
0
2,898
351
1,919
Asia
15.3 EUROPEAN MARKET
In Europe, seaweed aquaculture has only developed to any commercial extent in
France where wakame is being grown for food, although this does not appear in
international data. It is likely that more extensive seaweed aquaculture will become
more widespread in Europe over the next two to three decades.
Ireland, with its extensive coastline, has a long history of seaweed use. Ireland’s
Atlantic seaboard in particular, is ideal for the settlement of seaweeds. Seaweed is
the basis for an industry providing valuable employment in coastal areas that are
geographically remote. Only a dozen or so larger species have been put to any
commercial use.59 Whilst there are not many companies actively involved in seaweed
or sea vegetable cultivation in Ireland at present, the industry employs several hundred
people, both part-time and full-time gatherers, plus those involved in the processing
side.The value of production of the seaweed industry in Ireland (€9 million) does
not figure in the Eurostat or Fishstat data, perhaps due to the relatively small size of
the industry.
58
FAO: ‘A guide to the Seaweed Industry’ 2003.
59
Morrissey J., Kraan S. & Guiry M.D., ‘A Guide to Commercially Important Seaweeds on the Irish Coast’, 2001.
2004 2005–09
42
Australasia
Middle East
North America
Western Europe
TOTAL (€M)
31
4
24
28,490
5,988
32,746
Source: Historic Eurostat, forecast DWL
Figure 15.1: Seaweed – Regional Segmentation
2005–2009
Source: Douglas–Westwood
90
MARINE INDUSTRIES GLOBAL MARKET ANALYSIS
15.4 CHALLENGES
The cultivation of seaweeds in Asia is fairly low-technology. Attached plants are
placed in the sea and there is a high labour content in the operation. Several attempts
have been made in various western countries to introduce high technology to the
cultivation of detached plants grown in tanks on land to reduce labour content but
none of these has become commercially viable to date.60
In Asia low labour costs married to simple and intelligent maricultural techniques
have proved very successful.The labour intensiveness of seaweed mariculture and the
absence of a ready market have been the main reasons why it has not developed to
any great extent in the west. Political instability in such Asian countries might be the
only way Europe could export to Asia.The Asian market expects high standards and
without experience in these markets it might be difficult to achieve penetration.
15.5 THE LONG-TERM – 2010 ONWARDS
There is likely to be a long-term growth in demand for seaweed and seaweed products.
The ultimate development of seaweed cultivation is probably in the growth of
genetically-improved strains with all environmental factors being controlled using
biotechnological techniques.
The production of low volume-high value species with potential in the cosmetics,
biopharma and neutraceutical areas will provide increasing business opportunities to
the sector in Ireland. Specific initiatives in R/D will however be required to optimize
cultivation methodology, to evaluate and to screen for bioactive compounds in the
biomedicine and biotechnology areas.
60
www.seaweed.ucg.ie
MARINE INDUSTRIES GLOBAL MARKET ANALYSIS
16 Seafood Processing
91
Irish Market €M
UK Market €M
1999–03
2004
2005–09
1,447
287
1,411
6,721
1,232
6,152
Europe Market €M
48,671
8,241
40,901
World Market €M
466,254
79,859
384,878
Definition – output value of processed seafood (fish and shellfish).
16.1 INTRODUCTION
Processing is a growing activity, fuelled by an increasing consumer appetite for ‘value
added seafood’ and by changing lifestyles.To add value to seafood the process may be
simply filleting or adding a sauce and creating a ready meal. As the world population
has increased, so has the demand for seafood products, with a greater percentage of
people worldwide consuming seafood today than 20 years ago. Further, consumers
are increasingly demanding consistent quality and availability of seafood at a
reasonable price.Worldwide seafood demand is projected to increase over 60% as
projected world population grows from 5.3 billion to 8.5 billion by 2025.61
Worldwide demand for capture fisheries product is estimated at 110 million tonnes in
2010.62 Our forecast suggests that the capture fisheries sector would only be supplying
74 million tonnes, although it is predicted that aquaculture production will increase
during the forecast period.
Figure 16.1: Seafood Processing – World Market
There is a generally a lack of information available on this subject, broken down in
any useful format, for the purposes of this report. Seafood processing revenues have
been estimated as being equivalent to the combined marine aquaculture and fishing
product value for each country.This view is based on data from a number of
countries including Canada, Ireland and the UK.
Source: Douglas–Westwood
Table 16.1: Seafood Processing – World Market
1999–03
Africa
Asia
Our methodology is based on the concept that processing can add up to 100% to the
overall value of the raw product. In other words, the market value is the production
value of marine aquaculture plus the production value of marine capture fishing.
This combined value correlates well with limited data found on countries’ value of
their processing industries.
Therefore, the forecast is based on the trends already defined by the fishing and
aquaculture sectors (ie the availability of the raw product). It could be argued that
there is a move towards more processing, with more value being added to the same
amount of raw product as consumer demand increases. For the purposes of the report
we have maintained the trends estimated for fishing and aquaculture production.
Australasia
16,636
274,700
‘Aquaculture Research & Development Strategic Plan’, United States Joint Subcommittee on Aquaculture.
62
Feidi, I.H, October 1999, ‘International Seafood Production & Trade to 2010.Where Are We Headed?’
11,839
48,390 236,159
7,323
1,240
5,898
E Europe/FSU
14,705
2,092
9,355
Latin America
58,187
9,720
46,162
3,277
562
2,582
42,756
6,980
31,981
8,241
40,901
Middle East
North America
Western Europe
TOTAL (€M)
48,671
466,254
79,859 384,878
Source: Douglas-Westwood
Figure 16.2: Seafood Processing – Regional
Segmentation 2005–2009
16.2 WORLD MARKET
In 2004 the seafood processing industry is estimated to be worth €80bn. Asia has the
biggest proportion of activity, at over 60% of production, due in part to its large
domestic seafood market. Historical and forecast values are based on the trends already
defined by the fishing and aquaculture sectors (i.e. the availability of the raw product).
As a result the industry is forecast to decline, from an historical peak, during the
61
2004 2005–09
2,634
Source: Douglas–Westwood
92
MARINE INDUSTRIES GLOBAL MARKET ANALYSIS
reported period, of over €100 billion in 2001 (due mostly to exchange rate
fluctuations) but towards the end of the period the impact in the increase of
aquaculture production leads to a slight upturn, but not to levels previously reached.
Forecast average annual growth for 2005–2009 is therefore still negative, but
marginally at –0.4%. If displayed in dollars, then the processing sector would show
steady growth throughout the forecast period (see table 16.1).
16.3 EUROPEAN MARKET
The European market is valued at €8.2 billion in 2004.The value-added culture is
not spreading in a consistent way across Europe. In most Mediterranean countries
people still have the desire to have a whole fish on their plate and processing can cut
the value.63 However, generally, value-added products are year by year taking a greater
share especially within the chilled fish sector. From the available information, we
estimate that within the EU, the UK has the largest processing industry, followed by
Spain.64 A considerable export market exists for processed seafoods. Norway’s
international sales have been greatly aided by the establishment and development of a
premium brand. Obviously far more detailed analysis would have to be performed to
ascertain individual countries’ processing output accurately. As a result some individual
countries’ values may be inflated or deflated.
Challenges for smaller producers such as Ireland include the need to develop and/or
invest in automation and increase production to achieve both economy of scale,
volumes and continuity of supply required by the major European supermarket
chains.The processing industry is an important employer in coastal communities
within Ireland. Our estimates for Irish activity seem to correspond fairly closely with
the BIM data.The Irish processing activity was worth €287 million in 2004.65
Due to the major differences in labour costs, it is sometimes cheaper for European
countries to export unprocessed products to the Far East and Eastern Europe for
processing and re-import, rather than process at home.
63
Intrafish, ‘Value Added Seafood Trends’, November 11 2004.
64
Eurostat
65
Based on DWL estimates.
MARINE INDUSTRIES GLOBAL MARKET ANALYSIS
16.4 2010 ONWARDS – THE LONG-TERM VIEW
The combined factors of more women in full time employment, higher disposable
incomes, sophistication of tastes and declining cooking skills mean value-added
seafood sales have been increasing, creating more opportunities for the processing
business. New species are also likely to be added to those used by processors.
European processors will have to focus on the fresh/chilled market to remain
profitable and compete with the frozen products from low cost countries further
afield.This is good news for European processors, as chilled products are outselling
frozen in some countries such as the UK.
Increased processing efficiency is required, to both reduce labour contents and extract
more meat per fish, therefore increasing productivity.
93
94
MARINE INDUSTRIES GLOBAL MARKET ANALYSIS
MARINE INDUSTRIES GLOBAL MARKET ANALYSIS
17 Offshore Oil & Gas
95
Irish Market €M
UK Market €M
Definition – total capital and operational expenditure. (Not the value of the offshore oil & gas
production which is considerably greater.)
17.1 INTRODUCTION
Some 35% of global oil production and 27% of gas production is from offshore.
Expenditure is divided into two main areas, capital expenditure (Capex) –
the investment in offshore field development and operational expenditure (Opex) –
the cost of maintaining and operating the fields. Depletion of reserves in shallow
waters (<500 m water depth) worldwide is causing the oil majors to move into deep
water regions of the world such as Africa, Brazil and deepwater Gulf of Mexico
where major fields are still to be found, with most future growth forecast for these
regions.This move to deepwaters has resulted in the growing utilisation of
floating production systems and subsea production technology at the expense
of fixed platforms.
17.2 WORLD MARKET
Although offshore oil & gas is probably the world’s largest marine industry in terms
of the value of its output, as a market it is third largest after shipping and marine
tourism. Its input cost (total expenditure) in 2004 is likely to be €91 billion.We
expect this to grow to €99bn by 2009 and to be maintained at a similar level to
2012.The main market driver is the continuing growth in global energy demand of
which oil & gas supplies some 62%. Most of this growth is coming from the
developing economies. Average annual growth is forecast at 1.7% from 2005 to 2009.
(It should be noted that values are given in 2004 prices at a time when high demand
for services is inflating oil companies’ costs.)
17.3 EUROPEAN MARKET
European expenditure was €19 billion in 2004. In 2005,Western Europe is expected
to account for 20% of global offshore expenditure, however with production at its
peak the region’s share will decline to 15% by 2009. After nearly 40 years of
production Europe is a mature region and is now entering an irreversible long-term
decline.The North Sea has been the region of greatest activity over the past 30 years.
In 1979, the UK had 14 offshore oil fields operating, producing an average of 112,000
barrels per day (b/d) by end 2003 numbers had increased to 157 and average
production per field fallen to 13,000 b/d. Ireland, with very few offshore fields, is
forecast to continue to be a small producer unless there are some major discoveries;
however, Irish and Irish-owned companies supply some niche technologies to a
number of key foreign markets. Historic period spend for Western Europe, 1999–2003
was €134 billion, forecast to drop to €82 billion for the 2005–2009 period.
1999–03
2004
2005–09
478
114
483
30,751
54,699
7,927
Europe Market €M
133,583
19,112
81,681
World Market €M
504,110
91,146
475,748
Figure 17.1: Offshore Oil & Gas – World Market
Source: Douglas–Westwood
Table 17.1: Oil & Gas – Expenditure Totals
1999–03
2004 2005–09
Africa
54801
13202
81923
Asia
84243
14617
71616
Australasia
16749
3235
17430
7755
3926
35024
Latin America
74037
12817
67662
Middle East
47251
9459
48483
North America
85691
14778
71930
E Europe/FSU
Western Europe
133583
19112
81681
TOTAL (€M)
504110
91146
475748
Source: Douglas-Westwood
Figure 17.2: Offshore Oil & Gas – Regional
Segmentation 2005–2009
Source: Douglas–Westwood
96
MARINE INDUSTRIES GLOBAL MARKET ANALYSIS
Figure 17.3: Offshore Oil & Gas –
European Expenditure
17.4 OFFSHORE EUROPE
Two countries, Norway and the UK are forecast to account for 86% of European
expenditure over the next five years, the remainder being mainly divided between
Denmark, the Netherlands, Italy and Ireland.
Although there could still be some significant discoveries, capital expenditure is
already seeing decline, but operational expenditure will remain high for many years.
With the oil majors exiting the North Sea for other regions, considerable
opportunities remain for small oil companies and in this respect, the UK sector is seen
as one of the world’s most attractive ‘plays’.
There are many small undeveloped fields (up to 250 in the UK sector) and these offer
opportunities for development by tie-backs of subsea wells to existing platforms and
pipelines. In addition, there are many prospects for new companies to acquire existing
‘brown fields’ from the existing oil majors
Source: Douglas–Westwood and EnergyFiles
17.5 IRELAND OFFSHORE
Ireland borders a large area of the north Atlantic margin including the Rockall
Trough and the Porcupine Basin, due west of the Celtic Sea. However, there has been
limited success with the only commercial production being from gas fields.
Three gas fields have been brought into production whilst one will begin producing
in 2005. Marathon’s Kinsale Head field came onstream in 1978 in the Celtic Sea and
met Ireland’s gas needs until 1996, when a pipeline was built to import gas from the
UK. Kinsale Head and the nearby small Ballycotton field are in decline but this area
has seen other small discoveries.
Ramco brought the Seven Heads field onstream in December 2003 using a five well
subsea system tied back to the Kinsale Head A platform, where the gas is processed
and exported through the existing pipeline to the Inch Terminal near Cork.
Production peaked at 2.1 million cubic metres per day and in late 2004 production
was restricted to 0.7 million cu m/d as the data was assessed.
The Corrib gas field was discovered in 1996 in 355m water depth in the Porcupine
Basin some 80 km west of County Mayo.The field has eight planned subsea wells
tied back to an offshore pipeline. Reserves are around 70% the volume of Kinsale. A
processing terminal is planned in County Mayo.The field is expected to go into
production in 2006–7.
MARINE INDUSTRIES GLOBAL MARKET ANALYSIS
The World Offshore Oil and Gas Forecast66 suggests that it is fairly unlikely that further
gas finds on a par with Kinsale Head and Corrib will be found and assumes that
Ireland will reach peak gas output at around 2.8 Bcm per year (more than double
2004 rates) in 2006 and then slowly decline as additional smaller finds in the Celtic
Sea are brought onstream. It is forecast that 1.9 Bcm will be produced in 2015.
Although some small oil discoveries have been made in the Celtic Sea no oil
production has been achieved from Ireland and none is forecast in the period of
this report except for negligible amounts of condensate.
17.6 OFFSHORE ACTIVITIES
Initial exploration is mainly by the use of seismic surveys. Drilling is a major activity
with about 1,000 exploration & appraisal wells drilled each year and more than 2,000
development wells creating a total annual expenditure exceeding $37bn in 2004.
Drilling and completing wells can form 50% of the costs of developing an offshore
field.The other major items are fixed and floating platforms and pipelines.
Fixed platforms are still the main development method with over 6,400 estimated
to have been installed in the Gulf of Mexico to date (mainly very small ones).
The North Sea has some 600, with a combined weight of 12 million tonnes.
Where economics do not permit dedicated platforms, fields are often developed
by wells completed on the seabed and ‘tied back’ (connected) to platforms.
This is particularly the case for small fields and fields of all sizes in deepwater.
In many instances, particularly in deepwater, subsea wells are tied back to floating
production platforms.
As a region matures Capex declines and Opex dominates – this is becoming the case
with the North Sea.
Eventually, fields reach the end of their productive life and are decommissioned.
Over 100 small platforms per annum are removed from the Gulf of Mexico. Due to
its larger structures decommissioning will eventually become a major activity in the
North Sea.
66
Douglas-Westwood Limited, 2004.
97
Figure 17.4: Subsea Field Development Costs
Source: Douglas–Westwood
98
MARINE INDUSTRIES GLOBAL MARKET ANALYSIS
Figure 17.5: Deepwater Oil & Gas Production
17.7 DEEPWATER
The growth of deepwater activity (>500m) is one of the most significant trends of
recent years with the most important areas being Angola, Brazil, Nigeria and the
US Gulf of Mexico – where it now accounts for 60% of total production. In 2004
deepwater oil production, about 2.6 million b/d, comprised 10% of global offshore
production and deepwater gas production of around 7%.
We expect deepwater production to grow from a present oil & gas equivalent of
3.4 million b/d, to 8 million b/d by 2008 and continue its growth beyond 2012.
17.8 FLOATING PRODUCTION
The development of deepwater fields has resulted in a strong growth in the use
of floating production systems.The most common form is the FPSO, (floating
production, storage and offloading system).
FPSOs are usually tanker conversions, with 137 deployed to end 2003. Other types
include semi-submersibles (FPSS) and more custom structures such as spars and
tension leg platforms (TLP).
Source: The World Offshore Oil & Gas Report
We forecast a continued growth in the use of all types of floating production.
Although floaters are used in all water depths, most of this growth will be associated
with deep waters.
17.9 TECHNOLOGICAL CHALLENGES
There are many technological challenges facing the offshore industry. In common
with other sectors, a key theme is that of reducing costs. Particular targets are the
main expenditure sectors of drilling, production facilities and pipelines.
Deepwater operations – the record for deepwater production is currently some
2,316m but exploration is happening in greater than 3,000m water depth. Such great
depths represent major challenges. Operations in deep water considerably increases
the time and therefore costs associated with drilling (a shallow water well can cost
$5 million – a deepwater one 4 to 20 times this).
Installing heavy seabed hardware therefore becomes a challenge as the weight of
lowering cable rapidly exceeds the weight of the hardware multiplying the winch
capacity required.
MARINE INDUSTRIES GLOBAL MARKET ANALYSIS
Flowlines to deliver production of product to surface facilities need to be heavily
insulated and/or heated and dynamic risers from floating production form a
particular challenge.
99
Figure 17.6: Floating Production
Expenditure Forecast
Subsea processing – the output of an oil well is a mixture of oil, gas and water and
the latter increases over time. A major need is to extend the flow distances of
unprocessed oil & gas by separating the product (on the seabed rather than on
production platforms). An alternative is to develop pumping technology able to
handle this multiphase mixture. Significant progress is being made in both these areas.
Floating production – a major new FPSO can cost in excess of €500 million and
costs increase significantly in harsh environment areas (such as the Atlantic margins
and off Northern Norway).
Mature fields – a growing proportion of the world’s oil & gas, both onshore and
offshore, is being produced from fields that are in decline.This proportion is currently
nearing 50% and by 2012 could account for nearly 45,000 b/d.67 Increasing
production from mature fields represents a major business opportunity likely to attract
considerable funding in future years.
The Reservoir – the ability to image and understand the reservoir that contains the
oil & gas is fundamental to the future success of the industry, both in terms of finding
new reserves and managing the structure to achieve maximum economic recovery.
Considerable progress has been made, but continuing investment is needed.
17.10 THE LONG-TERM – 2010 ONWARDS
As discussed earlier, we expect to see a continuing growth in world offshore oil and
gas production beyond the time frame of this report. However, production will
decline significantly in the mature (shallow-water) regions and be balanced by that
from deep waters.
It is forecast that after 2010 all offshore oil production growth will come from deep
waters, compensating for declining output from shallow waters. From providing
around 34% of total global oil production in 2004, offshore oil is forecast to be
providing 39% by 2015.68
From providing around 28% of total global marketed natural gas production in 2004,
offshore gas is forecast to be providing 34% by 2015. By this time around 12% of gas
will be coming from deep waters compared to 7% in 2004.
67
‘Optimisation revitilises brownfields’ E&P, pp12–17 December 2004.
68
‘The World Offshore Oil & Gas Report’, Douglas-Westwood Limited.
Source: The World Floating Production Database
100
MARINE INDUSTRIES GLOBAL MARKET ANALYSIS
Global offshore Capex is forecast to grow from €49bn in 2004 to €52bn in 2006
before slowly declining to €46bn by 2015, as opportunities slowly become exhausted.
Global offshore Opex is forecast to continue increasing from €40bn in 2004 to
€52bn in 2015 as total output grows, especially from more expensive deepwater
environments.
The above is based on present costs, however, over the longer term, after around 2010
when a sustained increase in oil prices is likely as a global energy supply gap develops,
it is very possible that real cost increases will materialise. Additional cost overheads
within some parts of the offshore exploration and production industry could lead to
expenditure growth, but without altering activity levels to a great extent.
MARINE INDUSTRIES GLOBAL MARKET ANALYSIS
18 Marine Renewable Energy
101
1999–03
2004
2005–09
Irish Market €M
46
–
255
UK Market €M
108
109
3,356
Europe Market €M
738
121
11103
World Market €M
741
128
12,649
Definition – total capital expenditure on wind, wave and tidal current installations.
18.1 INTRODUCTION
This sector is made up of expenditure on wind, wave and tidal installations.
Currently a very small industry, the forecast for growth is huge.
Figure 18.1: Marine Renewable Energy –
World Market
18.2 WORLD MARKET
Investment in offshore renewable energy is now growing strongly, but from a very
small base. From €128 million capital investment in 2004, expenditure is expected to
exceed €5.6 billion by 2009, plus operating expenditure. Some 85% of forecast
expenditure in the period 2005 to 2009 is expected to be in Western Europe with
North America forming the second largest segment at 12%.
The main market driver is the political response to global warming.The UK, for
example, wants to generate 10% of its electricity from renewables by 2010 and 20%
by 2020.The most obvious solution is to increase the use of windpower. However,
the best European onshore locations are becoming used up, there are considerable
local objections to the visual impact of wind turbines and the best (windiest) sites
often have no nearby access to the main transmission grid.
Source: Douglas–Westwood
Table 18.1: Marine Renewable Energy – Totals
1999–03
The industry is therefore beginning to move offshore where turbines are out of
sight and have a better wind environment.There have been relatively few installations
to date but major growth is forecast.We are at the beginnings of an important
new industry.
The other developing technologies are wave and tidal current power.These are
at a much earlier stage of commercial take-up and are forecast to form only 1% of
the capital investment in offshore renewable energy by 2009. However, they have
considerable long-term potential
18.3 EUROPEAN MARKET
Over the next five years, Douglas-Westwood forecast that Western Europe will
account for 88% of global expenditure on marine renewable energy. Under present
plans, Ireland would continue to be a very small producer with its share reducing due
to strong growth in other countries’ activities. However, the country’s potential as a
location for offshore renewable energy projects is considerable.
Africa
0
2004 2005–09
0
0
20
Asia
1
0
Australasia
0
0
6
E Europe/FSU
0
0
50
Latin America
0
0
0
Middle East
0
0
0
North America
2
7
1470
Western Europe
738
121
11103
TOTAL ($M)
741
128
12649
Source: Douglas-Westwood
Figure 18.2: Marine Renewable Energy –
Regional Segmentation 2005–2009
Source: Douglas–Westwood
102
MARINE INDUSTRIES GLOBAL MARKET ANALYSIS
Figure 18.3: Offshore Windpower –
European Capital Expenditure
18.4 OFFSHORE WINDPOWER
There are 17 operational offshore wind farms worldwide.The 324 installed turbines
in these projects provide a total of 605 MW. A total of 2,258 turbines are forecast
to be installed between 2005 and 2009, a total of 7,500 MW.
The most recent project is the 60 MW Scroby Sands wind farm off the UK.
The first offshore wind turbines were installed at Vindeby off the Danish island of
Lolland in 1991, but significant activity did not begin until 2001. Once the associated
industry was deemed established, the Danish government’s economic support for
offshore windfarms was withdrawn and new installations virtually ceased.
By 2008, it is likely that the UK will be the world’s largest purchaser of equipment
and services, with Germany taking the lead in 2009.The US may also begin
to develop into a significant market over the period.
Source: Douglas–Westwood
Figure 18.4: Offshore Wind Turbine Size
The first ten years saw small projects being built in very shallow water, near shore
locations.These wind farms, in most cases, used onshore turbine models with slight
adaptations.These ‘demonstration’ projects have paved the way for the more recent
projects that are much larger.
Ireland has a relatively high number of project proposals. In the Alternative Energy
Requirement competition AER VI round, two 25 MW projects (Kish and Bray
Banks) were granted concessions. Both are under development by Saorgus Energy,
and Hibernian Wind Power – owned by state company ESB. Scheduled start-up date
is 2006.The 200 MW first phase of the 700 MW Codling Banks project, originally
to begin construction by 2007, may be delayed to the end of the decade.
The 520 MW Clogher Head offshore wind farm off County Louth is under
development by Airtricty. It is in two sections, one of which borders Northern Irish
waters.The wind farm will generate electricity to both Ireland and Northern Ireland
when it is commissioned, potentially by 2010.
18.5 TECHNOLOGICAL CHALLENGES
Increasing offshore wind turbine size is a key issue – fewer turbines mean lower costs.
Source: Douglas–Westwood
The Arklow Banks wind farm off Ireland has seven 3.6 MW turbines operating,
presently the largest in the world. Prototype 4 MW turbines are expected in 2005/6,
5 MW from 2007 and by 2009 these will be the norm. Above this size the
MARINE INDUSTRIES GLOBAL MARKET ANALYSIS
technology becomes significantly more costly and difficult to implement (The blades
on a 5 MW turbine span over 120 metres.)
At the same time distances from the shore and water depth are increasing.The
deepest installation to date is Samsø off Denmark, with ten 2.3 MW turbines in an
average of 19m water depth.
The largest project currently operational is the 165 MW Nysted wind farm off
Denmark. In ten years time, 1 GW will be a standard size.The largest project to be
announced is some 75 km offshore Germany in 40m of water, with a target capacity
of 17,500 MW.
At these locations installation work becomes significantly more difficult. Standard
monopile foundations are not ideally suited to large turbines in deeper waters and
tripods or jackets are proposed. Specialised vessels with ‘legs’ that lower to the seabed
to give stability are used for installation.
18.6 WAVE & TIDAL POWER
In comparison to the more established offshore wind sector, both wave and tidal
energies are embryonic sectors and barely register economically because of the low
level of activity.The small number of announced projects limits the short term
outlook for these industries.
To give an example, in 2009, we expect over 30,000 MW of offshore windpower
installations worldwide and only 15 MW of wave and tidal installations.
Nevertheless, despite being overshadowed by the offshore wind sector, wave and tidal
energy offer much long-term potential and the next five years will see a number of
technologies reach commercial application and be installed in multiple-unit
configurations. In this respect these developing industries can be seen as being at a
similar stage to offshore wind a little over a decade ago.With sufficient
encouragement, sizeable wave and tidal farms will be in place by the next decade.
‘Wave power’ is defined as electricity produced by devices utilising the direct and
indirect action and movement of waves in the horizontal and/or vertical planes.This
includes devices located offshore, nearshore and on the shoreline. Operating examples
include the Limpet shoreline device installed in 2000 on the island of Islay off
Scotland’s west coast and the Wave Dragon off Denmark which was the first offshore
grid-connected wave energy device when it was commissioned early in 2003.
103
104
MARINE INDUSTRIES GLOBAL MARKET ANALYSIS
‘Tidal’ is electricity produced as a direct consequence of the large-scale movement of
bodies of water due to the ebb and flow of the tides.
‘Tidal Current Stream’ is electricity produced through the regular flow of currents.
Whilst tidal action may affect the direction and intensity of a current stream its
motion is not directly dependent upon it. Operating examples include Marine
Current Turbine’s ‘seaflow’ project off the UK, which was the first tidal current stream
turbine to come online.
Table 18.2: Electricity Generation Costs
Energy Type
€Cents/kWh
Onshore Wind
5.3
Offshore Wind
7.9
Wave/Tidal
9.5
Nuclear Fission
3.3
Coal
3.6 – 4.6
Gas
3.2 – 4.5
Source: The Royal Academy of Engineers
March 2004
18.7 THE LONG-TERM – 2010 ONWARDS
The major challenge faced by offshore renewable energy is in reducing its costs to be
comparable with ‘conventional’ power generation from gas and coal.
The costs in table 18.2 include:
• Capital cost, fuel and operational cost
• Transmission and storage of gas.
Standby generation is also needed for onshore/offshore wind for periods of low wind
and if included this would add approx 1.7 cents/kWh.
Other studies by OXERA, for the UK government’s Renewables Innovation Review,
show that prices for onshore wind could drop to 3.9 cents/kWh by 2010.
Most of the new power generation capacity installed in Western Europe and many
other countries in the past 20 years is fuelled by gas. However, the UK (and the US)
are now facing gas supply shortages and although new foreign supplies can be sourced
these will be at a higher cost.
In addition, by the middle of the next decade it is likely that shortages of oil, leading
to real price increases, will boost demand for gas and result in further gas price
increases.We believe that the overall result of this will be to improve the competitive
position of renewable energy.
There is also potential for the drive for development of renewable energy resources to
change progressively from green politics to security of supply.
MARINE INDUSTRIES GLOBAL MARKET ANALYSIS
19 Minerals & Aggregates
105
Irish Market €M
1999–03
2004
2005–09
–
–
–
3,648
UK Market €M
3,008
672
Europe Market €M
5,761
1,344
6,938
World Market €M
11,746
2,741
14,149
Definition – value of aggregates and other minerals recovered from the seas.
19.1 INTRODUCTION
Marine production of minerals and aggregates has to date mainly been focused on the
extraction of sand and gravel.
Figure 19.1: Minerals & Aggregates –
World Market
Marine aggregates are an important mineral source for industrial use and coastal
restoration projects. Extraction activity is ongoing from several continental shelves
including Japan (the largest producer), the UK (the second largest producer), the US,
France, Denmark and the Netherlands. Reconnaissance of reserves has been carried
out in Brazilian waters.
‘Minerals & Aggregates’ is dominated by the production of aggregates which are
supplied to local markets in metropolitan areas together with supply to beach
replenishment projects.
Offshore dredging reduces the need for onshore sand and gravel pits so bringing
certain environmental benefits. However, concerns have been raised about the impact
on the local marine environment with the result that the process tends to be confined
to restricted areas.
Other Minerals:The recent increases in demand for minerals and associated price
increases have re-kindled interest in seabed ‘mining’.
Source: Douglas–Westwood
Table 19.1: Minerals & Aggregates –
World Market
1999–03
Africa
225
53
273
3840
896
4626
Australasia
0
0
0
E Europe/FSU
0
0
0
Latin America
0
0
0
Asia
The much discussed development of exotic deepwater minerals such as manganese
nodules and hydrothermal sulphides is prohibited by very high recovery costs.
Methane hydrates, although strictly not a mineral, are receiving a high level of
research interest worldwide.
The United Nations International Seabed Authority is continuing its work in
attempting to regulate exploration for seabed minerals but has not yet presented a
text for adoption.
Technology: Seabed ‘mining’ of exotic minerals both in deep and shallow waters
offers future markets for subsea technology.The $30 million vessel MV Kovambo
used off Namibia for subsea diamond dredging has a 160 tonne integrated seabed
crawler, a new application of underwater vehicles.The UK-built crawler is the largest
remotely controlled underwater vehicle (ROV) in the world.The mining company
has also deployed a Danish autonomous underwater vehicle (AUV) to carry out
seabed survey from the Kovambo.
2004 2005–09
Middle East
0
0
0
North America
1920
448
2313
Western Europe
5761
1344
6938
11746
2741
14149
TOTAL (€M)
Source: Douglas-Westwood
Figure 19.2: Minerals & Aggregates – Regional
Segmentation 2005–2009
Source: Douglas–Westwood
106
MARINE INDUSTRIES GLOBAL MARKET ANALYSIS
19.2 WORLD MARKET
The world value of the industry is estimated at €2.7 billion in 2004, with Japan being
the largest producer.The sector is dominated by the production of aggregates which
are supplied to local markets, with offshore dredging reducing the need for onshore
pits so bringing environmental benefits.
Historically the sector has displayed steady growth through to 2004, from €2.3 billion
in 1999.The forecast is for growth, with average annual growth of 2.7% leading to a
value of €3.1 billion in 2009.
19.3 EUROPEAN MARKET
Within Europe, with the industry valued at €1.3 billion in 2004, the UK dominates,
with the industry employing 2,500 people and extracted 22 million tonnes in 2003.
Period growth is forecast from total value 1999–2003 of almost €6 billion to almost
€7 billion during 2005–2009.
MARINE INDUSTRIES GLOBAL MARKET ANALYSIS
20 Shipbuilding
107
Irish Market €M
UK Market €M
Definition – total capital value of ships =>100GRT. Excludes naval vessels.
20.1 INTRODUCTION
The world shipbuilding industry is currently enjoying a strong upturn due to the
major growth in demand for shipping discussed earlier.World economic growth is
buoyant and it is expected to remain so in the medium term boosted by the very
strong growth of the Chinese economy and, to a lesser extent, that of other
developing economies.World seaborne trade has increased with exports of
containerised goods and imports of commodities such as oil & steel.The commercial
shipping industry has become more profitable than at any time during the previous
decade and ship-owner confidence has grown.The overall result has been a surge of
orders for vessels and yards currently have full order books, newbuild tanker prices are
up by 40% and average delivery time extended from two to three years.69
It is unlikely that such high economic growth rates can be sustained and in 2007–8
we expect a return to more normal activity levels as the new tonnage is absorbed by
the market. As a result, many shipyards are not adding further capacity. Shipbuilders’
profits have been hit by a combination of a large rise in steel prices and a fall in the
US$. A result is that South Korean yards are reported to be targeting fewer orders in
2005.70 For over a decade the prices of newbuilds has been on a downward trend.The
1990-based US$ index had fallen by 50%, mainly due to chronic overcapacity
resulting from government subsidies, often attacked by the EU to little effect.71
A resumption of the lower long-term growth trend is, however, likely in the
foreseeable future. From some $35 billion in 2000, we expect the total value of
shipbuilding output to peak at around $45 billion in 2004–2006, and then fall to
$39bn in 2008 before returning to its underlying long-term growth trend. However,
as shown in an earlier chart, the recent major variations in the euro/dollar exchange
masks this dollar market rise.
The industry has, over the longer term, produced an average of some 1,800 vessels
per annum. Notable changes in the market have included a trend towards larger
vessels, especially container vessels and tankers.We believe that this will continue but
will not appreciably affect the average size of new vessels constructed during our
forecast period.
There has been a growth in average vessel size and we may well see 10,000+ TEU
container vessels before 2008 but their numbers will be small.
69
‘Lloyd’s List’ Annual Review 30 December 04.
70
‘Lloyd’s List’ 5 January 2005, p1.
71
‘Report from the Commission to the Council on the Situation in World Shipbuilding’, Commission of the European
Communities, 2003.http://europa.eu.int/comm/enterprise/maritime/
1999–03
2004
2005–09
2
0
2
1,001
234
928
Europe Market €M
63,913
13,143
52,076
World Market €M
183,440
37,746
155,017
108
MARINE INDUSTRIES GLOBAL MARKET ANALYSIS
Figure 20.1: Shipbuilding – World Market
20.2 THE WORLD MARKET
The world shipbuilding sector is valued at almost €38 billion in 2004.The European
Commission notes that: “Historically, the industry has suffered from the absence of
global rules and a tendency of (state-supported) over-investment due to the fact that
shipyards purchase a wide range of technologies, employ a significant number of
workers and generate foreign currency income”.72
The major development in global shipbuilding since the second world war has been
the growth of SE Asia as the main shipbuilding region and the decline of Europe.
This originally began with the post-war rise of Japan and then South Korea. (In 2002
the European Commission reported its efforts to stem the effects of “certain business
practices by Korean yards” concluding that their “prices do not cover the full costs
of production”.73)
During this period, Korea entered new market segments and boosted demand in
existing ones by aggressively cutting prices despite its increasing costs.
Source: Douglas–Westwood
Table 20.1: Shipbuilding – World Market
1999–03
Africa
2004 2005–09
71
11
49
109,058
22,604
94,402
985
174
804
E Europe/FSU
3,498
650
2,995
Latin America
493
97
446
83
15
71
Asia
Australasia
Middle East
North America
5,339
1,052
4,174
Western Europe
63,913
13,143
52,076
TOTAL (€M)
183,440
37,746 155,017
Japan undertook massive restructuring by bringing together yards into umbrella
groups and by retaining the major share of its large home market – Japanese owners
are noted for being very reluctant to place orders with foreign yards.
The other and more recent change is the development of China into a major
shipbuilding nation, facilitated by its low labour costs and state investment. Past
organisational problems and difficulties of access to technology have rapidly been
overcome.The EU’s annual report on shipbuilding notes the growth in China’s share
of the world market growing from 7% in 2000 to 13% in 2002.Today the SE Asian
region dominates the delivery of tankers, bulk carriers and other large vessels that can
be efficiently produced by ‘industrial’ shipbuilding techniques.
Source: Douglas-Westwood
Figure 20.1: Shipbuilding – Main Regional
Segmentation 2005–2009
The present up-cycle was triggered by the growth of the Chinese economy. Overall
world economic activity has also grown, the cruise industry has recovered and
shipowners’ profits have been high generating cash for re-investment in new tonnage
producing a surge in ship orders in 2003 and 2004.
The peak is now in sight and we expect the Chinese economy to cool somewhat and
new orders to decline in 2005 and 2006 before a return to the underlying lowergrowth, long-term trend. A major uncertainty in the period ahead is the reaction of
the SE Asian yards to a return to lower order levels. However, a further situation that
could impact on demand for shipbuilding is that 1,119 single hull tankers are, in
Source: Douglas–Westwood
72
73
http://europa.eu.int/comm/enterprise/maritime/
‘Sixth Report from the Commission to the Council on the Situation in World Shipbuilding’ Commission of the European
Communities, 13 November 2002.
MARINE INDUSTRIES GLOBAL MARKET ANALYSIS
theory, due to be phased out by the end of 2005.74 The market shows future decline
in euros (-4% annually 2005–2009) although this is not so significant in US dollars –
the currency of the market.
20.3 EUROPEAN MARKET
Shipbuilding is an important and strategic industry in a number of EU Member
States, with Europe’s industry valued at €13 billion in 2004. Shipyards often play
a significant role in regional industrial infrastructure and, with regard to military
shipbuilding, involve national security interests.
The European shipbuilding industry is the global leader in the construction of
complex vessels such as cruise ships, ferries, mega-yachts and dredgers. It also has
a strong position in the building of submarines and other naval vessels. Equally, the
European marine equipment industry is a world leader for a wide range of products,
from large diesel engines to marine electronics.
According to the Association of Western European Shipbuilders and Shiprepairers
(AWES), in 2003:
• The European industry provided 20% of the world shipbuilding capacity.
• Direct employment totals more than 129,000 jobs and the supply chain an
additional 500,000.
• Average turnover of the shipbuilding is €14.4bn.
• Europe has a strong global position in complex vessels (64%) and ship repair (42%).
• The industry has a network of 9,000 sub-suppliers across Europe, mostly SMEs.
• 10% of turnover is spent on research, development and innovation through a high
level of prototyping and the predominance of one-of-a-kind products.
In addition to shipbuilding, European ship repair and conversion was a business
valued by the AWES at €2.2 billion in 2003. Germany is the largest player with
a share of €553 million followed by the UK with €420 million.
Europe has lost market share in terms of total tonnage due to the decline in orders
for ‘standard’ ships which can be produced more cheaply in SE Asia. However, it has
retained the higher value-added, lower-volume parts of the market for more
specialised vessels such as cruise ships, smaller tankers and ships used by the offshore
oil & gas industry.
74
‘Destination Unknown’, European single hull tankers report. Greenpeace 2003.
109
110
MARINE INDUSTRIES GLOBAL MARKET ANALYSIS
Shipbuilding, like shipping, is a highly cyclical industry. At the time of its sixth report
on the situation in world shipbuilding in late 2002, the European Commission had
noted the impact of past over-ordering following a period of almost continuous
growth from 1995 to 2000.The uncertainties in the world economy following the
events of 11 September 2001 resulted in a fall in confidence and a major reduction in
orders – 60% down in mid 2002 at 3 million CGT, compared with a quarterly peak
of the 7.5 million CGT in mid 2000.
In the EU the situation was even worse with a decline of 80% in new orders. 9/11
also resulted in a major fall in orders for cruise ships, a European specialist sector.
Between 2000 and 2002 the EU share of the world shipbuilding market fell from
19% to 7% and the Chinese share grew from 7% to 13%.
In 2002 the EU authorised direct aid of 6% to shipyards as a Temporary
Defensive Mechanism.
Although Ireland does not have a significant shipbuilding capability, it is necessary
to understand the shipbuilding sector as it is a driver for others such as marine
equipment, education & training, R&D, etc.
20.4 TECHNOLOGICAL CHALLENGES
Fuel price increases have resulted in growing pressures to reduce vessel operating costs
and the major challenge is to radically improve propulsion efficiency. Engine emission
reduction is also a significant challenge.
20.5 THE LONG-TERM – 2010 ONWARDS
The long-term is fundamentally a function of the growth in world seaborne trade,
the underlying driver of shipping demand, which fuels owner confidence and results
in more shipping orders.
In recent years there has been an increase in the size of vessels but this may reach
its practical limit as a function of ports’ capacity.
Of increasing significance could be the growing desire in Europe, and to a lesser
extent the US, to transfer road freight to short-sea shipping and this could result in
an increase in orders for smaller vessels.
MARINE INDUSTRIES GLOBAL MARKET ANALYSIS
21 Marine Equipment
111
Irish Market €M
UK Market €M
Definition – value of equipment and materials purchased for commercial shipbuilding
and oil & gas installations.
21.1 INTRODUCTION
Marine Equipment is a very large market and in this report we define it as being
comprised of two main customer groups:
1999–03
2004
2005–09
1
0
1
571
133
529
Europe Market €M
94,741
16,675
73,263
World Market €M
355,826
72,871
358,315
Figure 21.1: Marine Equipment – World Market
• Shipbuilding sector capital items (e.g. propulsion systems & machinery) total €21bn
with over 5,000 suppliers listed worldwide.
• Oil & gas sector (e.g. production of platforms, pipelines, subsea equipment, etc)
total €49bn and over 6,000 suppliers are listed worldwide.
One of the problems in valuing this sector is definitions. Many other smaller sectors
such as offshore renewable energy could also be included; however, these are much
smaller than oil & shipbuilding and would not make a significant difference to the
totals.We specifically exclude military equipment.
There is growing technology content in all sectors, with hundreds of high-tech subsectors ranging from software to underwater connectors to control systems and it is
within these that the main opportunities for SMEs exist.
21.2 WORLD MARKET
As mentioned above, there is no clear definition of what constitutes marine
equipment. Often it is regarded as bought-in items of the shipbuilding process such
as propulsion systems and other machinery, the bridge systems, control and
automation, but also extends to scuttles, washroom and galley equipment, etc. In our
analysis we include all bought-in items.The world market for marine equipment in
2004 was €73 billion, marine equipment in the shipbuilding sector accounted for
€21.3 billion of this.
Many definitions of ‘marine equipment’ only recognise the shipbuilding sector and
exclude all others.The definition we use includes the capital expenditure item of
the offshore oil & gas sector. In the oil & gas sector we use the capital expenditure
component which we value at €49.7 billion in 2004.The segmentation of this
expenditure by type of technology varies from region to region and also by water
depth. Historically, the market was worth €64 billion in 1999. Since then, the sector
has displayed slight fluctuations, but a general trend of growth, with forecast value
of €70 billion for 2009, representing a slight decline of 0.6% annually from 2005
following a peak of €74 billion in 2006.
Source: Douglas–Westwood
Table 21.1: Marine Equipment – World Market
1999–03
Africa
Asia
Australasia
29,465
102,144
2004 2005–09
8,341
46,050
21,756 101,385
9,989
2,124
11,557
E Europe/FSU
6,047
3,739
27,278
Latin America
37,857
6,147
32,588
Middle East
18,542
4,255
20,238
North America
57,061
9,834
45,956
Western Europe
94,721
16,675
73,263
TOTAL (€M)
355,826
72,871 358,315
Source: Douglas-Westwood
Figure 21.2: Marine Equipment – Regional
Segmentation 2005–2009
Source: Douglas–Westwood
112
MARINE INDUSTRIES GLOBAL MARKET ANALYSIS
Figure 21.3: Typical Ship Cost Segmentation
21.3 EUROPEAN MARKET
Europe is a major provider of marine equipment, particularly high technology and
was valued at €17 billion in 2004. In shipbuilding this ranges from electronic charting
and integrated bridge systems to advanced marine engines.
In 2000, Europe was estimated to satisfy 37% of the world demand for shipbuilding
sector marine equipment (whilst having only a 16% of the world shipbuilding
market).75 In 1997 the leading European suppliers of marine equipment were
Germany 22%, UK 19% and Norway 15%.
Source: Douglas–Westwood
In offshore oil & gas, Europe is again associated with high technology.
21.4 THE LONG-TERM – 2010 ONWARDS
The market was worth €64 billion in 1999. Since then the sector has displayed slight
fluctuations, but a general rend of growth, with forecast value of €70 billion for 2009,
representing a slight decline of 0.6% annually from 2005 following a peak of
€74 billion in 2006.This is due to a forecast slight decline in shipbuilding.There is a
growing technology content and hundreds of high-tech sub-sectors, many of which
offer opportunities.
75
‘3rd report from the European Commission to the Council on the situation in world shipbuilding 2000’.
(We assume this refers to ships equipment only.)
MARINE INDUSTRIES GLOBAL MARKET ANALYSIS
22 Marine IT
113
Irish Market €M
UK Market €M
Definition – IT hardware and software in all aspects of marine activities. (Excludes systems not
designed for specialised marine applications – e.g. typical office software.)
22.1 INTRODUCTION
There are more than 500 suppliers of ‘marine computing’ worldwide (these are
mainly SMEs, also there are many marine leisure sector players).
1999–03
2004
2005–09
43
18
78
648
217
917
Europe Market €M
3,794
1,382
5,872
World Market €M
9,780
3,570
16,012
Figure 22.1: Marine IT – Major Sectors
Marine IT is a subject that is difficult to assign precise boundaries to. IT hardware &
software applies to, and is embedded in, all aspects of marine activity so is difficult to
value.The major sectors are those associated with critical ship operations (e.g.
integrated bridge), equipment support (e.g. engine management) and marine
operations (e.g. cargo handling).
Source: Douglas–Westwood
In addition there are many shore-based applications ranging from fleet management
software to vessel traffic systems, and design software for various marine systems
ranging from ships’ hulls to dynamic risers for floating production systems.
In total, marine IT covers a very wide range of subject areas and systems including:
Critical IT – Navigation, Charting, Engine Management, Systems Management,
Positioning, Communication, Loading/stability,Weather Forecasting and Ocean
Modeling, Data Management.
Non-critical IT – ISM Code Reporting, Accident & Injury Reporting, Cargo
Transactions, Fuel Reporting, Bunkering Ops, Cargo Status Reporting, Crew &
Payroll, Daily Log, Engineers Log, Invoices, Manifesting, Supplies, Equipment
Performance Log, Equipment Procurement, Internet, Classification Reporting,
Maintenance Management, Purchasing Management, Mail,Work Systems.
Other IT – Design, Build, Procurement.
Office-based software – VTMS, Brokering, Engineering Procurement, Crew
management, Positioning/tracking, Accounting, Data Management, Fleet
Management,Vessel Scheduling, Planning & Reservation.
A significant barrier to development of marine IT has been the relatively high costs
of high data rate satellite communications compared with onshore hard-wire or
mobiles. Substantial improvements have been made but until broadband is successfully
launched by Inmarsat in 2005/06, a bottleneck will remain. It is possible that the
provision of internet services for the airline industry may speed up the process and
reduce costs. Boeing are entering the maritime satellite communications market,
challenging the historic dominance of Inmarsat.
114
MARINE INDUSTRIES GLOBAL MARKET ANALYSIS
Figure 22.2: Marine IT – World Market
The previously unavailable Mobile Packet Data Service is to open up new levels of
satellite communication to smaller vessels with the introduction of its capability into
the Fleet 33 service from Inmarsat. Operating in a similar way to a GPRS mobile
phone, the data connection is maintained constantly, resulting in users being charged
only for the amount of data sent or received rather the time spent actually on line.
As in other IT sectors, there is a degree of consolidation ongoing as companies
acquire other players in order to offer a range of applications.
22.2 WORLD MARKET
The very wide range of applications and lack of any official information on business
activity in the marine sector means that it is difficult to value the market.
Source: Douglas–Westwood
Table 22.1: Marine IT – World Market
1999–03
Africa
2004 2005–09
328
124
786
3,517
1,315
5,620
Australasia
129
43
224
E Europe/FSU
200
94
565
Latin America
466
140
742
Middle East
461
169
808
1,396
Asia
North America
885
304
Western Europe
3,794
1,382
5,872
TOTAL (€M)
9,780
3,570
16,012
Source: Douglas-Westwood
Figure 22.3: Marine IT – Regional Segmentation
2005–2009
Source: Douglas–Westwood
In order to develop a market value, we have assumed that the IT content of capital
expenditure in three key areas of shipping operations (including IT additions to
existing ships), newbuild ship capex, and the offshore oil & gas industry capex &
opex averages 0.5% and this grows to 0.75% by 2004 and thereafter remains at
this proportion.
For example, in the case of a €35 million medium size tanker this would equate to an
IT value of €262,000.This may at first sight appear high, but the value is intended to
include capital items on the vessel such as the IT content of bridge systems,
communication systems, embedded engine control & management systems, safety
and automation systems, etc., right down to the software packages used in the design
of the vessel.
It may be argued that the IT content of other sectors could also be added, however,
the values are much smaller than the three above, and that the IT content of the very
large marine tourism sector is mainly shore-based conventional hotel/reservation
management systems and not marine-specific.
On this basis, marine IT was valued at €3.6 billion in 2004. Historically marine IT
has been growing substantially from €1.3 billion in 1999.There is an overall longterm increase in IT content in the marine sector. Globally, the sector is set for long
term steady growth; however after a peak in 2004, annual growth is forecast at –0.9%,
although period growth 2005–2009 is 7%.
MARINE INDUSTRIES GLOBAL MARKET ANALYSIS
22.3 EUROPEAN MARKET
Europe accounts for some 39% of the world market in 2004 (€1.4 billion), this is
mainly due to the strong position in shipping, aspects of shipbuilding and the offshore
oil & gas industry. As a result many of the significant players in the sector are
European-based or owned.
These range from providers of electronic charting systems to specialist design
software. It is likely that a significant percentage of European companies’ revenues
from marine IT are from export business. Forecast period growth is estimated, from
€3.8 billion 1999–2003 to €5.9 billion 2005–2009.
22.4 TECHNOLOGICAL CHALLENGES
The main challenges ahead probably relate to the growth of low-cost manufacturing
centres in China, India and Eastern Europe.These are already used by a number of
European players with the result that local manufacturing jobs are being lost to
regions such as SE Asia.The growing capability of companies in these areas and
availability of graduate engineers at low cost probably means that design could also
move there too.
22.5 THE LONG-TERM – 2010 ONWARDS
The continual need to improve efficiency of operations in all sectors of the marine
industries will drive an increasing use of marine IT. Of particular significance will be
the need to respond to increasing fuel costs and increases in automation, vessel
tracking and security requirements and these will form the main focus for R&D.
The growing availability of affordable broadband communications will greatly
improve the prospects for marine IT, by lowering cost of remote access to shore-based
services and the rest of the ‘wired-world’.
115
116
MARINE INDUSTRIES GLOBAL MARKET ANALYSIS
MARINE INDUSTRIES GLOBAL MARKET ANALYSIS
23 Marine Biotechnology
117
1999–03
2004
2005–09
Irish market €M
–
–
–
UK market €M
–
–
–
Europe market €M
–
–
–
11,350
2,190
11,848
World market €M
Definition – the value of biotechnology products based on the use of marine organisms.
23.1 INTRODUCTION
80% of living organisms are found only in aquatic ecosystems, yet little is known
about their biochemical characteristics.The marine biotechnology sector is in the
early stages of its development with considerable interest being shown by the US,
Japan, the UK and others. (It is arguable that at this stage in its development the
Marine Biotechnology sector should be regarded as part of the R&D sector.)
Marine biotechnology offers considerable long-term potential which is mainly
outside the timeframe of this report.
However, there have been some initial successes – the US Sea Grant has reported
that with small investments five drugs have been developed “with market potential
of $2bn p.a.”
It is likely that the future marine biotechnology market should segment along similar
lines to the established ‘conventional’ biotechnology market which is dominated by
US companies (76% of global revenues followed by Europe 22%). However, the
UK report referenced below implies that this may not be the case and that much
more may be open to non-US companies.
A recent report commissioned by the UK’s Foresight Marine Panel stated “With a
global market valued at $2.4 billion in 2002, and a predicted growth rate exceeding
10% per annum over the next three years, there is no doubting that marine
biotechnology represents one of the most exciting emerging technology sectors”.76
The UK Foresight Report also stated: “Marine biotechnology is unlike other areas
of biotechnology in that it is defined in terms of its source material, rather than the
market it serves. It is anticipated that it will eventually contribute to nearly every
industry sector, from healthcare to bioremediation and from cosmetics to
nutraceuticals.The time to invest in the underpinning science, knowledge networks,
and public understanding of this major biotechnology field has now arrived”.
Examples of marine biotechnology are quoted in the UK report as follows:
• The potential for marine natural products as pharmaceuticals was first developed
in the 1950s which led to two marine-derived pharmaceuticals that are still in use
today. Ara-C is an anti-cancer drug (used against acute myelocytic leukemia and
non-Hodgkin’s lymphoma) and Ara-A used as an antiviral drug for treating herpes.
Both these drugs were derived from natural compounds found in sponges off the
76
http://www.dti.gov.uk/marine_biotechnology_report.html
Note: Being an early-stage development
there is insufficient information on which
to base a regional segmentation.
118
MARINE INDUSTRIES GLOBAL MARKET ANALYSIS
coast of Florida. Sponges have provided over 30% of the more than 5,000 chemical
compounds derived from marine organisms to date.
• More recently,Vent DNA polymerase has been isolated from micro-organisms
living around deep-sea hydrothermal vents. Polymerase Chain Reaction (PCR) is
used to amplify very small amounts of DNA or RNA, and forms the basic process
behind the gene mapping for the Human Genome Project. PCR requires enzymes
that are stable at high temperature, precisely the conditions that the Vent DNA
micro-organism has become adapted to.
• Nutraceuticals, or nutritional supplements, is a major growth area for the large
pharmaceuticals companies. Marine microalgae are known to produce high levels of
the fatty-acid, docosahexenoic acid (DHA) and arachidonic acid (ARA), both of
which are found at high level in breast milk. Because these polyunsaturated fatty
acids (PUFAs) have been linked to brain grey matter development, they are
regarded as an important nutritional supplement, especially for infants. One such
product, developed by Martek Biosciences in the US, is a market leader.
Figure 23.1: Marine Biotechnology –
World Market
23.2 WORLD MARKET
In 2004 world production was valued at €2.2 billion. An earlier report describes
the US marine biotechnology industry and the emerging market of marine
biotechnology products and services.The global marine biotechnology market
is projected to surpass €2.6 billion by 2009 with the non-US segment comprising
the bulk of the market.77
The UK Foresight Report gives a predicted growth rate “exceeding 10% per annum
over the next three years” (from 2002). BCC Research in 2003 estimated average
growth from 1999 to 2007 as:
Source: Douglas–Westwood
USA
4.7%
Rest of World
6.4%
Total
5.9%
Over-estimation of market growth in the early years of technological development is
a common failing, therefore in our forecasts we have chosen to use an average growth
of 5.5% . (The 5.5% is the forecast in dollars.When exchange rates are applied, the
Euro growth rate is 3.8%.) In our view it is likely that the anticipated very large
market for marine biotechnology will develop outside the time period of this report.
This makes marine biotechnology a very interesting long-term ‘investment’ prospect.
77
http://www.bccresearch.com/biotech/C184R.html
MARINE INDUSTRIES GLOBAL MARKET ANALYSIS
23.3 EUROPEAN MARKET
As the sector is in the early-stages of development, there is insufficient information on
which to base country or regional segmentation of data.‘Market’ is rather a misnomer
at this early stage of the development of marine biotechnology as the focus is firmly
on research.The EU has funded some 75 projects in marine biotechnology. Although
most countries have some level of activities, France and Germany are probably the
most significant players, followed by the Netherlands, Ireland and Sweden.
Within the UK some 61 Higher Education Institutes are involved in researching
and/or teaching marine sciences and of these 49 are involved in marine
biotechnology or related research.
Of particular significance may be the UK’s high level of development as a centre
for conventional (land-based) biotechnology.
With annual sales of over $9.7 billion, the biotechnology industry in the UK is
second in size only to the US. Along with some of the world’s largest pharmaceutical
multinational corporations, there are approximately 460 biotechnology companies,
including consultant and service companies, working in this sector. An estimated 270
are dedicated biotechnology firms and 48 are publicly traded. Small and mediumsized biotechnology companies drive the industry as key sources of innovation.78
Biopharmaceuticals are the primary strength of the UK biotechnology industry,
with an emphasis on genomics and gene therapy, combinatorial chemistry, regulation
of cells, and development of transgenic animals. As much as 70% of all biotechnology
companies focus on health care products.
The UK biotechnology industry is also characterized by clusters. Established to assist
start-up companies and combine expertise to strengthen the industry, biotechnology
clusters have become essential to industry growth.The clusters are located around
academic centres of excellence, the main focal points being London, around Oxford,
Cambridge and Scotland.
Key issues facing the UK marine biotechnology sector (and probably shared
by others) are regarded as:
• Developing stable financial investment.
• Creating productive communication between the marine biotechnology
community and the private and public sectors.
78
http://atn-riae.agr.ca/europe/e3345.htm
119
120
MARINE INDUSTRIES GLOBAL MARKET ANALYSIS
• Delivering to the industrial sector development leads that are needed and for which
they are willing to pay.
• Educating and training the people to make this possible.
• Promoting, marketing and positioning sector in a distinctive way.
23.4 THE LONG-TERM – 2010 ONWARDS
In 2002, Ernst & Young reported that there were 4,324 biotechnology companies
worldwide with 188,703 employees, R&D expenditure of $16.4 billion and revenues
of $35.8 billion. $25 billion of this was generated by US companies.79 ‘Invest in Japan’
stated that the Japanese biotechnology market was worth $10.2bn in 2002.80 These
numbers seem disproportionate, but do serve to illustrate the size of the industry.
Considering that the oceans contain 80% of living organisms, it is reasonable to
suggest that the long-term potential for marine biology must greatly exceed
conventional land-based biotechnology revenue values.
79
‘Refocus:The European Perspective Global Biotechnology Report 2004’. Ernst & Young.
80
http://www.jetro.go.jp/usa/newyork/investinjapan/html/bio_overview.htm
MARINE INDUSTRIES GLOBAL MARKET ANALYSIS
24 Education & Training
121
Irish Market €M
1999–03
2004
2005–09
–
–
–
UK Market €M
–
–
–
Europe Market €M
–
–
–
10,041
1,537
7,691
World Market €M
Definition – fees from higher education in marine subjects and training of marine personnel.
24.1 INTRODUCTION
Education & Training has three primary activities: seafarer training, offshore worker
training and higher education (e.g. universities).
Seafarer training – 400,000 officers and 825,000 ratings are employed worldwide
with 60% of the latter being from the Asia Pacific region.There has been a 27% oversupply of ratings although there are doubts about the extent to which large numbers
of these ratings are qualified for international service.81
The majority of ratings are recruited from developing countries, especially the Far
East.The Philippines alone provides almost 20% of the global maritime workforce.
The Philippines is the largest supplier of seafarers with some 180,000 or 28.5% of the
total maritime population of 632,000 on board vessels worldwide. Russia is second
with 7.3%.
Currently, 418 ‘maritime schools’ are listed worldwide. In 2000, there were 121
maritime schools in the Philippines rapidly resulting in an over-supply of trained
seafarers. However, in 2004 the number of schools was down to 76, twenty of which
will be phased-out in the next two years, after their last students have graduated.
Of the 500,000 registered Filipino seafarers, enough to man most of the vessels afloat
around the world, more than 300,000 are unemployed.
However, other countries are also adding training capacity – South Africa opened
a 150 student training academy in 2003 offering two three-year courses.
Amongst training now being used are tools such as bridge and engine room
simulators. Specialised courses for the fishing industry are offered by some
establishments. In 2003, 1,681 attendances were registered in Ireland at the country’s
BIM Training Centres.
China and India are also significant maritime labour supply nations. Other major
labour supply countries include Greece, Japan, Norway, Russia and the UK.
There is regarded to be a 4% undersupply of officers which is expected to rise to
12% by 2010.The OECD countries remain the most important source for officers,
but growing numbers of officers are now recruited from the Far East and Eastern
Europe and it is expected that this trend will accelerate as the ageing OECD officer
group retires.
81
http://www.marisec.org/resources/2000Manpowerupdate .htm
Note: As training may be provided in one
country to meet demand from other
countries, it is difficult to segment the
‘market’ by regions.This is particularly the
case for the shipping industry and to a lesser
extent higher education.
122
MARINE INDUSTRIES GLOBAL MARKET ANALYSIS
Figure 24.1: Education & Training –
World Market
Seafarer training typically costs $5–20K and officer $40K. Refresher and ongoing
training, such as fire-fighting or sea survival, are an additional training cost.
We estimate over 2005–9 a total of 177,000 personnel will need training.
Offshore workers undergo safety training on a four year cycle.With an estimated
80,000 workers worldwide, some 20,000 are trained per annum. Safety training facilities
are established in most of the world’s significant offshore oil & gas operating areas.
Safety training has been provided by the industry for many years, with the highest
standards emanating from the North Sea due to a more demanding offshore
environment than the Gulf of Mexico (from where the offshore industry originated)
and its extensive use of helicopters for crew transfers.The need for even higher
standards of safety and training was bought into focus following the Piper Alpha tragedy.
Source: Douglas–Westwood
In addition to normal fire and first aid training, helicopter evacuation training
has long been a requirement for North Sea workers and is conducted in
specially equipped tanks.The introduction of free-fall lifeboats also introduced
another requirement.
North Sea service providers, mainly based in the UK and Norway, have also
developed into international markets.
Higher education establishments offering marine courses total at least 241
worldwide. However, it is difficult to estimate all associated expenditure in this area as
total operating costs of institutions often greatly exceed fees charged. In addition, it is
difficult to clearly separate the education element of institutions’ activities from
research activities.
All education and training has a strategic role in ‘marketing’ the supplier country
and its technology to foreign students.
24.2 WORLD MARKET
The world value is estimated at €1.5 billion in 2004. Due in part to a recent oversupply of seafarers being trained, levels of activity have fallen slightly.This is due to be
followed by a slight upturn with other areas within the sector seeing growth, resulting
in annual average growth 2005–2009 of 1.5%.
MARINE INDUSTRIES GLOBAL MARKET ANALYSIS
25 Research & Development
123
Irish Market €M
UK Market €M
1999–03
2004
2005–09
325
62
329
3,252
621
3,294
Europe Market €M
15,742
3,273
16,471
World Market €M
50,484
10,629
54,320
Definition – expenditure on R&D in all aspects of marine activities.
25.1 INTRODUCTION
Research & Development relates to four main sub-sectors: shipbuilding, oil & gas,
other industrial, and government (mainly academic). Our figures exclude the
important military naval sector where the US accounts for €13bn and the world
total could be €26bn.This is important to the civil sector, not only in terms of
direct military contracts which can financially underpin companies, but also the
technological spin-off into civil applications.The US Navy budget for development,
testing & evaluation has increased from $14.9bn in 2004 to $16.3bn in 2005.This
includes $477m for basic research, $564m for applied research, $677m for advanced
technology development, $2.8bn for advanced components development and $8bn
for system development and demonstration.82 The US has a programme to specifically
involve SMEs in military R&D.
Figure 25.1: R&D – World Market
25.2 WORLD MARKET
The Marine R&D sector is valued at €11bn for 2004. A number of sectors make
up this global value. Historically, activity has been fairly constant with forecast growth
estimated at 1.4% annually from 2005 through to 2009.
Source: Douglas–Westwood
• We value shipbuilding R&D at €1.8bn and its future growth is mainly a function
of future growth of revenues. Centres of shipbuilding R&D exist through Europe
and SE Asia.
Africa
• The oil & gas industry is estimated to spend €2.5bn, but in future years this must
increase in line with the technical challenges that will be faced. Major centres are
Brazil, France, Norway, the UK and the US. (Our estimates are based the mid point
of figures produced separately by McKinsey and Shell.)
• Other marine industries, we believe, total some €1bn in annual R&D spend.
Table 25.1: R&D – World Market
1999–03
Asia
Australasia
2004 2005–09
716
151
762
10,981
2,332
11,709
1,083
225
1,163
E Europe/FSU
1,377
286
1,488
Latin America
2,184
445
2,368
Middle East
2,137
445
2,329
North America
16,266
3,472
18,030
Western Europe
15,742
3,273
16,471
TOTAL (€M)
50,484
10,629
54,320
Source: Douglas-Westwood
• Government is a major spender with over 1,200 ‘research’ vessels operating
worldwide.The US leads and we estimate NOAA’s marine budget at €2bn. Other
countries probably total €3 billion.The response to global warming is likely to
increase this.
Figure 25.2: R&D – Regional Segmentation
2005–2009
82
Source: Douglas–Westwood
‘Sea Technology Buyers Guide/Directory’ 2005.
124
MARINE INDUSTRIES GLOBAL MARKET ANALYSIS
Figure 25.3: Marine R&D by Sector
25.3 EUROPEAN MARKET
Europe’s share of the world market was €3.3 billion in 2004 and is set to grow to
€3.5 billion by 2009. “Research & Development (R&D) is a driving force behind
economic growth, job creation, innovation of new products and increasing quality of
products in general, as well as improvements in healthcare and environmental
protection. At the Lisbon summit in 2000,The European Council set a clear strategic
objective for the current decade: to make Europe the most competitive and dynamic
knowledge-based economy in the world.”83
Source: Douglas–Westwood
There has been some progress in this. In terms of patents filed per head of population
in 2001, Finland, Germany, Norway and Sweden greatly exceeded the US despite the
Us’s higher total R&D spend measured as a percentage of GDP.
“R&D intensity is highest in Sweden and Finland (3.4 and 4.3% of GDP) but total
expenditure greatest in Germany, France and the UK. Portugal, Denmark and Ireland
(1.2%) show the highest real growth rate in R&D expenditure.”
Western Europe is responsible for a major part of world R&D activity, probably only
second to the US.The majority of R&D expenditure in Europe comes from industry.
Offshore Oil & Gas – This has benefited from major research programmes in
France, Norway and the UK, resulting in products and technologies sold worldwide.
In the past considerable European Commission funding has been applied to
programmes such as ‘Hydrocarbons Research’ with the aim of reducing dependency
on OPEC oil supplies by development of offshore Europe. However, EU official
focus has now moved onto renewable energy.
Initially, incoming oil companies were ‘encouraged’ to invest in R&D as part of the
UK licensing requirements until this fell foul of EU regulations.
However, production of oil & gas from Norway, is mainly by the Norwegian state oil
companies, who have always invested heavily in R&D.
Nowadays, the main application of oil company R&D funds is in joint industry
programmes (JIP) where they can access 100% of the results for a fraction of the cost.
However, oil companies tend to keep any ‘competitive edge’ R&D in-house or
contract it out on a confidential basis to commercial companies or universities.
The main technical challenges are now at the extremes of the sector: deepwater,
exploiting the many remaining small shallow water fields and maximising recovery
83
‘Eurostat Yearbook’ 2004.
MARINE INDUSTRIES GLOBAL MARKET ANALYSIS
from depleting fields (‘brown fields’).Within Scotland the government funded ITI
Energy organisation has initiated a significant programme to address its mature oil &
gas assets.
Other programmes include the US Deepstar aimed at the challenges of deepwater
and there are similar programmes operating in Norway and Brazil.
Shipbuilding – Fuel price increases have resulted in growing pressures to reduce vessel
operating costs and the major challenge is to radically improve propulsion efficiency.
Engine emission reduction is also a significant challenge in light of EU requirements.
As with many other sectors, there is an increasing need for application of higher levels
of control and automation and overall safety.
The shipbuilding industry in Europe reports spending 10% of revenues in R&D,
however, much of this is associated with the need to develop specific design variations
(rather than ‘true’ R&D) for the special vessels that dominate European yards’
production.Therefore in our estimates we use 5% of revenues.
Other Industries – Offshore renewables is now a particular area of focus for the UK
and some other European countries.
Government – This includes the various facets of government-funded academic
research carried out in universities and other institutions.
25.4 THE LONG-TERM – 2010 ONWARDS
The long-term drivers are well known:
• Global Warming
• Population Growth
• Demographic change
• The Developing Economies.
125
126
MARINE INDUSTRIES GLOBAL MARKET ANALYSIS
Major R&D challenges lie ahead, including:
Oil & Gas – Increasing exploitation of gas reserves in light of reducing oil supplies,
increasing oil & gas recovery from brown fields and greater water depths, and
economically developing small fields.
Renewable Energy – Reducing capital costs and improving reliability. Operating
wind farms in deeper waters and at greater distances from the shore. Development of
wave and tidal current power.
Methane Hydrates – We expect increasing efforts to commercially exploit this
potentially large deepwater energy resource. (Significant projects are already underway
in Japan.)
Shipbuilding – How to employ technology to counter high European labour costs
and the threat of China’s penetration of the ‘special vessels’ sector that accounts for
much of Europe’s business.
Marine Biotechnology – This is likely to receive increasing attention as its large
potential is more widely recognised.
Perhaps one long-term concern should be the development of major R&D
capabilities in Asia and the growing power of these countries to ‘undercut’ established
Western centres in attracting commercial R&D funds.We expect countries such as
China, India and Russia to become increasingly competitive due to low labour costs
(a graduate with a master’s degree can be employed in India at 25% of the cost of an
equivalent person in the US).
Offering to undertake R&D in a developing country is often seen as a way for an
incoming company to deliver local content.
A challenge for Western governments will increasingly be how to anchor technology
development in their own countries.
MARINE INDUSTRIES GLOBAL MARKET ANALYSIS
Notes
127
128
MARINE INDUSTRIES GLOBAL MARKET ANALYSIS
Notes
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